The central defender, who has become a mainstay under Javi Gracia, has signed the bumper deal after an impressive previous season.
The 30-year-old is now their defensive lynchpin and has committed the best years of his career to the club.
Cathcart joined from Manchester United in 2009 and has played 146 times for the Hornets.
The Northern Ireland star could have a new partner in central defense, with the club hoping to sign a center back this summer.
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