The English Premier League side are said to have fallen considerably short of the Ibrox side's £5m valuation of the Croatian international signed from NK Osijek for £2m in 2018.
Barisic penned a new contract in January last year until the summer of 2024 and the club are in no mood to sell on the cheap after easing their financial pressures by pocketing a £12m transfer fee for the sale of Nathan Patterson to Everton.
The Scottish Sun report that the Hornets made a follow-up offer that included £1.5 of add-ons for the 29-year-old, which the Scottish champions have also rejected.
Watford boss Claudio Ranieri now looks to have conceded defeat in his bid to land the Rangers target with negotations said to be dead in the water.
The Vicarage Road side have also been linked with Hibs left-back Josh Doig as they look to solve a problem position.