The talented young defender completed successful spells at Southend and QPR last term and ended up playing for QPR in the Second Division Play-Off Final at the Millennium Stadium in May.
Director of football David, in caretaker charge of the club, said: "He's gone to Watford for an initial month. There should be about seven games in that month, so that will be very good for him.
"Stephen did very well out on loan at both Southend and QPR last season and I've got high hopes for him."
David Pleat revealed this afternoon that Stephen Kelly has gone on a month's loan to First Division outfit Watford.