Britos had been due to be out of contract at the end of June, meaning he would have been able to leave Vicarage Road as a free agent.
The 32-year-old centre back featured just 12 times during the 2017/18 campaign as a result of injury, but the Hornets have decided to retain his services for at least one more season.
Having spent seven seasons in Italy with Bologna and Napoli, Britos arrived at Watford following the club's promotion to the Premier League in 2015. He played 56 times in all competitions during his first two seasons, helping the team stay afloat in the top flight.
Watford have additionally confirmed the departure of defensive pair Brandon Mason and Charlie Rowan from the Under-23 ranks, while Yazid Kaikay and Reece Stray have been let go at Under-18 level.