A report in Marca claims that there is a personal agreement between Gracia and the club while an official announcement is now expected to be confirmed on Monday.
Long-serving Valencia custodian Voro had been interim coach at the Mestalla for the final weeks of the 2019/20 following the sacking of Albert Celades last month, but the club are now hopeful of announcing a permanent appointment in the coming days.
Gracia is most well-known in Spain for his two-year stint in charge of Malaga between 2014 and 2016, leading the cash-stripped club to successive top-half finishes.
He subsequently left the Andalusian club to join Russian club Rubin Kazan before switching to Watford in January 2018 and subsequently leading the Hornets to last season’s FA Cup final.
However, he was removed from his position earlier this season after a winless start to the campaign and has been out of work in the months since.
Valencia have missed out on European football this summer and the club reportedly have to slash their budget by up to 40 percent ahead of next season, with reports from Spain earlier this month outlining how multiple player exits are expected this summer.
Captain Dani Parejo, Jasper Cillessen, Eliaquim Mangala, Mouctar Diakhaby, Geoffrey Kondogbia, Ferran Torres, Francis Coquelin, Goncalo Guedes, Ruben Sobrino, Kevin Gameiro and Rodrigo Moreno are among the other players likely to exit Valencia this summer.