Dyche has been touted for the vacancies at Championship rivals Birmingham and Hull in recent weeks yet he is keen to remain at Vicarage Road following a promising debut season in charge.
"It has been very flattering to be linked with some high-profile vacancies, and I have had one or two agents sounding me out since the end of the season," he said.
"But quite honestly I am very happy at Watford. I really appreciated the chance given to me a year ago when I was made manager after Malky (Mackay) went to Cardiff, and loyalty works both ways.
"I thoroughly enjoyed my first season; it was a great learning curve for me in so many ways and I loved every minute.
"To be within touching distance of the play-offs was very encouraging and hopefully we can continue to make more progress next season.
"Obviously I'm an ambitious person, but my ambition right now is to build on what we achieved last season and make Watford competitive in a very tough league."