The Brazilian wideman is surplus to requirements this season at Stamford Bridge.
The Brazilian left-footed forward joined the Blues from Fluminese in June of last year, arriving for a fee thought to be in the region of £6.3 million.
The 20 year old featured intermittently during his first season in West London, becoming more a regular presence in the first team upon the arrival of interim boss Guus Hiddink midway through the campaign.
Kenedy featured more frequently under Hiddink
In all he made 14 Premier League appearances last term, 20 in all competitions - scoring twice.
Watford got off to a solid start to the new season on Saturday, earning a commendable point at Southampton in Mazzarri's first game in charge.
Watford manager Walter Mazzarri is reportedly interested in Kenedy
Troy Deeney found the net for the Hornets, but it appears that Watford are looking to improve the service he and strike partner Odion Ighalo are receiving up top, with the club also linked with Juventus wideman Robert Pereyra, as outlined by Tuttomercatoweb.
Mazzarri will also have noted Kenedy's versatility, illustrated by Hiddink's deployment of the forward at left-back during his time at the Bridge.
Kenedy in action for Chelsea with Swansea's Jefferson Montero
Nevertheless, despite showing a willingness to adapt his game, it looks as though Kenedy is surplus to requirements for new boss Antonio Conte, and a loan move could best suit all parties.