Tottenham's new stadium is still not ready and they have so far played their home matches at Wembley this season, but the national stadium will not be available for the EFL Cup tie due to Anthony Joshua's heavyweight fight with Alexander Povetkin on September 22.
Watford were keen to switch the match to Vicarage Road, but the EFL has now confirmed that it will take place at the 30,500-capacity home of the MK Dons, who were knocked out by Bournemouth in the second round of the competition.
"At its meeting on Thursday, the EFL Board granted Tottenham Hotspur Football Club dispensation to play their round three Carabao Cup tie against Watford Football Club later this month at Stadium MK," read a statement from the EFL.
"As a result of Wembley Stadium and the new Tottenham Hotspur Stadium being unavailable during the week commencing September 24, the club approached the EFL prior to last week's draw requesting the Board consider an application to play at a neutral venue in the event they were drawn at home.
"The rules of the Carabao Cup provide for the Board of the EFL to consider the home club's request to play at neutral venues or to reverse the fixture. The decision to grant dispensation takes into account all relevant circumstances facing the home club at the time the fixture is scheduled to take place.
"The board fully considered Tottenham's request alongside strong representations from Watford who formally asked the League to play the tie at Vicarage Road. It was determined that as a result of Tottenham being drawn at home, the tie should be played at the venue of the club's request, on the proviso that the visitors will receive a ticket allocation of not less than 10 per cent and Tottenham fund any venue hire costs.
"The dispensation granted has been done so on the basis that any future rounds in this season's Carabao Cup competition are played at either Wembley Stadium as their current home venue, the new White Hart Lane, or at a neutral venue. The club will not be able to reverse any fixtures in 2018-19, should they progress and be drawn at home in future rounds."
Spurs were beaten by Watford at Vicarage Road last weekend, ending their 100% start to the season.