Brendan Rodgers, a long-time admirer of Graham, initially saw a £3m offer rejected by the Hornets soon after Swans gained promotion to the Barclays Premier League courtesy of last Monday's play-off final victory over Reading at Wembley.
But the south Wales club returned with an improved offer of £3.5m which Watford accepted over the weekend, paving the way for talks over personal terms with the forward who bagged 24 league goals last season to top the Championship's scoring charts.
There are no shortage of suitors for Graham's services, with Watford having previously rejected bids of £2.5m from QPR and West Bromwich Albion.
And although the path is now cleared for the 25-year-old to talk to Swansea, rival parties will be alerted to the £3.5m figure accepted and may now launch similar bids.
A statement on Watford's official website reads: "Watford Football Club confirms that it accepted a £3.5m bid for Danny Graham from Swansea City FC over the weekend.
"This means the player is permitted to talk to the Swans about his future. The 25-year-old striker remains under contract at Vicarage Road in the meantime."
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