Hodgson will replace Claudio Ranieri, who was sacked as manager on Monday after just 14 matches in charge.
Sources have told ESPN that Hodgson will be joined by long-time assistant coach Ray Lewington, with the duo charged with keeping the club in the Premier League this season amid a disastrous run of form that spelled the end of Ranieri's time in charge. Sources added that Hodgson was at Watford's training ground on Monday evening ahead of official confirmation of his move.
Ranieri won just two matches in three-and-half months at Vicarage Road and a statement from the club on Monday read: "The board feels that, with nearly half of the Premier League campaign remaining, a change in the head coach position now will give a new appointment sufficient time to achieve the immediate goal of retaining Premier League status."
Hodgson will join Watford with the club 19th in the Premier League, two points from safety. His first match in charge will be at relegation rivals Burnley on Feb. 5. He will be the club's third manager of the 2021-22 campaign, after Ranieri replaced Xisco Munoz in October.
The former England boss last managed in the Premier League in 2021, calling an end to a four-year spell at Crystal Palace. During his time in charge of England, Hodgson reached the Euro 2012 quarterfinals but failed to advance to the knockout stages at the 2014 World Cup. His time in charge of the national team ended after a disastrous round-of-16 exit to Iceland at Euro 2016.
Information from ESPN's James Olley was used in this report.