Watford are in talks with Chelsea over signing midfielder Nathaniel Chalobah for a fee in the region of £5m ($6.5m).

Chalobah, 22, spent the 2012/13 season on loan at Watford and is keen on returning to Vicarage Road, according to the London Evening Standard.

Chelsea were prepared to offer a long-term contract to Chalobah, who made 10 league appearances for the club last season, but the player had reportedly wanted assurances over first-team football before signing.

The Blues are likely to insert a buy-back clause in any deal with Watford, similar to the one they included in the transfer that took Nathan Ake to Bournemouth.

Chalobah joined Chelsea's academy from Fulham at the age of 10. He represented England in this summer's European Under-21 Championship in Poland.

If the deal goes through, the midfielder will become the seventh player to permanently exit Stamford Bridge this summer after Ake, John Terry, Juan Cuadrado, Asmir Begovic, Bertrand Traore and Christian Atsu.

Diego Costa is also expected to leave the club in the coming weeks amid interest in the forward from Atletico Madrid.

Nathaniel Chalobah
Nathaniel Chalobah made 10 Premier League appearances for Chelsea last season Getty

The Daily Mirror reported that Atletico were preparing a £22m bid for Costa despite a transfer ban rendering them incapable of registering new players until January.

The La Liga side are reported to have drawn up a special training programme to keep Costa match fit while he is not playing games.

Atletico boss Diego Simeone is determined to bring Costa back to the Spanish capital, while Chelsea are also open to the possibility of selling him.

Blues manager Antonio Conte informed Costa via text message that he was no longer part of his plans last month, with the club's hierarchy fearing that the move had wiped out millions off the striker's market value.

Costa's representatives are due to hold talks with Chelsea officials later this week, with the player set to return from holiday next week.