The 27-year-old joined Watford on loan from Everton in the January transfer window, and has impressed in his first eight appearances for the Hornets.
According to the Watford Observer, the midfielder's loan move will become permanent when he makes one more appearance for Watford, which is expected to take place against Sunderland on April 1.
Cleverley signed for Everton from Manchester United in the summer of 2015 and made 30 appearances for the Toffees during the 2015-16 season under Roberto Martinez.
The attacking midfielder only started four Premier League matches for Everton in the first half of this season, however, and was deemed surplus to requirements following the arrival of Morgan Schneiderlin from Man United.
Cleverley has provided two assists in his eight Premier League appearances for Watford this term.