Watford have reportedly agreed with Fiorentina a fee of 2.3 million pounds and offered the player a two-and-a-half-year contract.
Zarate, who has previously played in England for Birmingham City, West Ham United and Queens Park Rangers, could fly to London to pass his medical by Sunday night.
The 29-year-old Argentinian, who has also played for Lazio, had moved to Florence from West Ham during the last January transfer window but failed to earn a spot in the starting XI of the Viola.