Mackay has been linked with a number of vacancies at other clubs this season, including Newcastle and Burnley, after an impressive campaign so far.
"I think supporters have seen a man at work who genuinely cares for the well-being of Watford," chairman Graham Taylor told the club website.
"I'd like to remind our supporters that when we first appointed Malky we, as a board, made it very clear we felt it important we should stand firmly behind our manager at all times, and as such gave him a three-year contract.
"Malky's willingness to accept the challenges that face him and buy into the philosophy of the club has been admirable.
"So we have secured the services of two men who want to put the future of Watford first in everything they do."
Mackay and Dyche took up their roles in the summer of 2009 following the departure of Brendan Rodgers.
In their first season at the helm, with the club teetering on the edge of entering administration, the Hornets maintained their Championship status.
And this campaign, despite being pre-season favourites for the drop and a heavy reliance on academy products, has seen the Hornets establish themselves in the top half of the table.
Source: BBC Sport
Source: BBC Sport