The Barclays Premier League newcomers had opened talks with Inter last month in a bid to lure the former Newcastle player back to England.
However, the 24-year-old full-back has turned down a move to Vicarage Road.
"I can say that the deal is now off the table and negotiations will not continue," Hornets owner Gino Pozzo told www.fcinternews.it
"I see no particular enthusiasm in the lad, despite all the time that we gave him to reflect and evaluate the deal."
Santon, a youth product of Inter, returned to the Italian club in January on loan from Newcastle and made nine league appearances for the Nerazzurri
Inter made Santon's move a permanent one last month once the player's contract with the Magpies had expired
Santon is under contract with Inter until June 2018 and is eager to remain at the club next season
"At this point it doesn't seem logical to put pressure on the player," Pozzo said
"It's a pity because we had an agreement on everything but Santon doesn't want to leave Inter."
Watford, who gained promotion to the top flight after finishing second in The Championship last season, have now switched focus to Inter's French midfielder Saphir Taider.
Taider, 23, has two years left on his contract in Milan.
The Algerian international spent last season on loan at Serie A side Sassuolo.
"Right now we cannot talk about a proper negotiation," Pozzo said
"For the time being it's a possibility that we are all evaluating
We do like the player."
Source : PA
Source: PA