The Arsenal midfielder, who spent the latter part of last year at Scunthorpe United, has become a key part of the Hornets team.
“I think he enjoys being here and his game has improved. He has had a taste of Championship football and is enjoying it so it is an environment where he wants to be in and we want him here as well,” Mackay told the Watford Observer.
Lansbury’s loan runs out after Monday’s game against Bristol City. Mackay also hoped to extend the loan of Heidar Helguson, the forward whose parent club is Championship rivals Queens Park Rangers.