Nathaniel Chalobah has extended his loan stay with Watford until the end of the season.
The Chelsea midfielder, 18, arrived at Vicarage Road in August and has been an integral part of the club's promotion push, making a total of 18 appearances.
And Chalobah, an England Under-21 international, will now complete the season with the Hornets after they agreed an extension with the European champions.
Manager Gianfranco Zola told the club's official website: "It's great news for us. He has become an important player for us since he came to the club.
"His performances have been getting better and better so we are delighted that Chelsea have decided to leave him here.
"It's good for Nathaniel and it's also good for Chelsea because he is getting a lot of benefit from this experience," added the former Chelsea attacker.
"It is a huge boost because if we want to keep improving and chasing the teams in front of us we need to have good players and Nathaniel is one of them."
Cole has started just nine Premier League games since he swapped Chelsea for Liverpool in the summer of 2010.
The midfielder has played the majority of his games with the Reds in cup competitions and was sent out on loan to Lille last term.
Reds boss Brendan Rodgers deemed the 31-year-old surplus to requirements when he took over last summer and Cole is keen to go back to Upton Park, where he began his career back in 1994.
Cole will have a medical at West Ham on Thursday and the London club hope to have him registered before midday on Friday so that he can play in Saturday's FA Cup clash against Manchester United.
West Ham will not pay a transfer fee for the England international as Liverpool are prepared to cancel his contract.
The Merseyside club would also pay him a negotiated settlement in order to get his estimated ?100,000-a-week salary off the wage bill.
