The Hornets are hoping to bolster their squad next month as they continue to fight for their survival, with the club currently sitting just three points above the relegation zone.
According to The Telegraph, Kolasinac is somebody that Watford manager Claudio Ranieri is considering, despite the fact the Bosnian is struggling with an ankle injury right now.
The 28-year-old returned from a loan spell with Schalke over the summer, since then he has only made four appearances for Arsenal.
Kolasinac has six months left on his current deal at the Emirates.
Watford will be back in action on Sunday when they face Wolverhampton Wanderers in their latest Premier League fixture.