The Hertfordshire club are preparing for their first season in the top flight since 2007, and are keen to strengthen key areas of their team.
Karacan can play in a central midfield position, as both an attacking and defensive force, and has proven his talent in the Championship on many occasions. He has made 175 appearances for the Royals, having started his career with the club, but has only registered eight league appearances this term, due to a series of injuries keeping him out of action.
He still has age on his side, and has Premier League experience to his name as well, having been part of the Reading side who were in the top flight in the 2012/13 season.
The report also states that Bournemouth are interested in signing Karacan, and with both clubs promoted to the Premier League, it appears as if it will be a straight up fight for the talented midfielder.
Being out of contract, Karacan will be a strong budget signing for whichever club manages to agree a deal with him, although there are still no indications as to what move he would prefer.
It is still likely that Reading will offer Karacan a contract extension, as he is a key figure in their playing squad, but with the allures of the Premier League on offer at Watford and Bournemouth, it is hard to see why the midfielder would remain at the Madejski Stadium.