The 30-year-old defender, who joined the Hornets' Academy at the age of nine, made his first-team debut under then boss Gianluca Vialli in 2001.
Doyley has since gone on to make over 400 appearances for the Hertfordshire club, including 39 last season as Gianfranco Zola's side tasted defeat in the Championship play-off final at Wembley.
And the loyal Jamaica international has been rewarded for his impressive form last term with a fresh deal at Vicarage Road.
Zola told the club's official website: "I am delighted that Lloyd will be with us again at Watford next season as he is an excellent professional and he always works very hard.
"He showed last season that he is a very important player for us and I believe he has a big part to play next season."
- Sports & Recreation
- Gianfranco Zola
- Gianluca Vialli