The Hornets and Reading have agreed a compensation fee for striker Uche Ikpeazu after months of talks, the Watford Observer understands.
The new EPPP compensation system has yet to be launched which means Watford and The Royals would have been set for a tribunal had they failed to reach an agreement over the fee for the 18-year-old.
It is understood the clubs will not disclose the figure when an announcement is made.
Reading were disappointed to see Ikpeazu leave in the summer after he ended last season as the top scorer in the country at academy level with 28 goals in as many games.
However, Ikpeazu is yet to make his first team debut and currently finds himself behind Troy Deeney, Mathias Ranegie, Fernando Forestieri and Diego Fabbrini when it comes to Watford's two attacking positions, with academy graduate Bernard Mensah, who made his debut in November, another first-year professional challenging.