The Hornets sacked Xisco Muñoz on Sunday morning following their defeat to Leeds at Elland Road.
It leaves the newly promoted side in 14th having won two of their seven games so far.
Xisco was hired in December last year and guided Watford to promotion from the Championship following a second place finish.
Watford’s board are notorious for their lack of patience however and have again wielded the axe at Vicarage Road.
It leaves them looking for yet another manager and Ranieri is now holding discussions over the vacancy, reports Sky Sport Italia.
The Italian’s most recent role was in his homeland with Sampdoria.
He has managed a host of Serie A clubs during his career including Juventus, Roma, Inter Milan, Parma and Fiorentina.
Valencia have previously hired him as have national side Greece.
Should he take up a role at Watford then it will be his fourth job in the Premier League.
He first came to British shores as an unknown quantity with Chelsea in 2000, where he spent four years.
Ranieri didn’t win any silverware during his time in west London but was present during the early Roman Abramovich era before he was replaced by Jose Mourinho.
His career highlight came when he was hired by Leicester City in 2016.
The Foxes had just escaped relegation and the 5000/1 outsiders went on to win the title in one of the biggest shocks in sporting history.
Ranieri though failed to last the following season and was axed in February 2017.
Fulham hired him in 2018 as they looked to retain their top flight status, but the Italian lasted just three months, winning three of his 17 games.
Why did Watford sack Xisco?
The Hornets were outclassed by Leeds in their most recent defeat and the board felt performances were heading in the wrong direction.
“The board feels recent performances strongly indicate a negative trend at a time when team cohesion should be visibly improving,” the club said.
“The Hornets will always be grateful to Xisco for the part he played in securing last season’s promotion and wish him well for his future career in football.
“No further club comment will be available until the imminent announcement of a new head coach.”