The 24-year-old's one-month loan deal was due to expire later today but he will now stay at Pride Park for the last seven matches.
"It's great news Craig is staying with us; he's come in and made a real impact on the side," manager Nigel Clough told the club's official website. "He's someone who we've admired for a while and he's come into the side and really impressed us.
"We think he has all the right attributes to be a very good player especially with his height, composure on the ball and he has a lovely left foot as well.
"We're delighted he's staying on for the next few weeks and hopefully he can maintain his form."
As part of the agreement, the Hornets can recall the midfielder at any time.