The French defender joined the Black Cats last summer from Tottenham, and became a key figure in their survival push after a stuttering start to his career on Wearside.
Kaboul, 30, started at the heart of defence in the 2-1 defeat to Manchester City, alongside Lamine Kone, who has also been linked with a move away from Sunderland.
Kaboul's partnership with Kone was part of the reason that Sam Allardyce was able to keep Sunderland in the Premier League, and David Moyes no doubt be unwilling to split up his best defensive pair, especially with the thin squad he already has.
The loss of Kaboul would be another setback for Moyes, who has had to deal with limited transfer activity, multiple injuries and the Kone saga during his short spell as manager at the Stadium of Light.
Kaboul could become the second player to depart Sunderland for Watford in 2016, with goalkeeper Costel Pantilimon making the switch in January. Walter Mazzarri's side started the season with a 1-1 draw against Southampton.
Sunderland fans have taken to Twitter to express their views on the possible departure of Kaboul to Watford.
Why would Kaboul go and play for Watford when he's seemingly guaranteed first team football here?— Joshua (@JoshBew95) August 16, 2016
Think I'll lose all faith if we start selling players like Kaboul for three million quid.— Gav (@Gav1879) August 16, 2016
don't want Kaboul to go but if its him or Kone I'd rather keep Kone, but what's the point, they look solid together, keep them both.— . (@MickyJSafc) August 16, 2016
If stones is worth £48mill Kaboul must be worth £75mill, that cross for fletcher against the mags was worth £50million alone— Marc Rowell (@rowelly91) August 16, 2016
I really can't see us selling Kaboul due to his importance and how thin our squad is, but I wouldn't be surprised if we did— Tain (@Aintainee) August 16, 2016