Vydra played a key part in Watford's ascent
However, the pair are said to have been put off by the Hornets' request for a £2 million loan fee.
Vydra, a Czech Republic international, scored 16 goals to fire the Hertfordshire side to promotion two seasons ago, however, he was farmed out to Reading last term.
The Czech striker struggled in Berkshire
The 24-year-old was unable to replicate his previous league form at the Madejski Stadium - scoring three goals in 31 appearances - though he ended the campaign with nine goals in all competitions.
Leeds have already shelled out in excess of £4 million on strikers Marcus Antonsson and Kemar Roofe this summer, though Birmingham are yet to fill the void left by Kyle Lafferty, who returned to parent club Norwich City at the end of last season.
Roofe (centre) is Leeds' biggest signing of the summer so far
According to the Sheffield Star, the Blues are considering a second bid for Sheffield United striker Che Adams having seen an initial offer, thought to be £1.2 million, turned down by the Blades.
The League One side are also said to want £2 million for Adams, which Birmingham may be more inclined to pay if it leads to a long-term deal.
Adams is a reported target for Birmingham and Wolves