Both clubs have reportedly been locked in negotiations over the last couple of weeks, and they have now found an agreement that suits all parties.
Watford are yet to agree personal terms with Lewis, although that is understood to not be an issue. It remains to be seen if the loan proposal will include an option or obligation to buy.
Lewis has two years left on his contract with Newcastle, but the Northern Irish defender is currently the fourth-choice left-back in Eddie Howe’s squad.
The 25-year-old is behind Dan Burn, Matt Targett and Paul Dummett in the pecking order.
Lewis is currently part of Howe’s squad in the United States, but the defender is set to spend next season with Watford in the Championship.
The Hornets have been on the market for a new full-back following the departure of Hassane Kamara, who returned to Serie A side Udinese after the expiration of his loan contract.
The 29-year-old made 32 appearances for Watford last season, contributing two assists as the Hornets finished mid-table. But they have opted against making his stay at Vicarage Road permanent.
Lewis joined Newcastle three years ago from Norwich City after coming through the youth ranks at the Canaries but has only managed 36 appearances for the Magpies, contributing one assist.
The Northern Ireland international, who has 30 caps for his country, featured just six times across all competitions for Newcastle last season.
Lewis is set to be Watford’s fourth signing of the summer transfer window following the arrivals of Tom Ince, Rhys Healey and Jake Livermore.
Genk attacking midfielder Giorgi Chakvetadze is set to join the Hornets on loan after passing his medical examination, and the transfer is only an announcement away from being confirmed.
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