The Australian forward, 26, has proved a big hit this season after Giants bought him from Salford Red Devils where he had previously worked under Watson.
Such has been the quality of Yates’ displays, he had attracted interest from the NRL but has now signed a new deal with Huddersfield until the end of 2024.
The West Yorkshire club have struggled for large parts this season but the former London Broncos front-row said: "It was the opportunity to stay with this group and Ian Watson has led me to make the decision to extend my stay with the club.
“We're going in a good direction with the personnel we've identified for next season, we're trying to push up the table and win things in the next three years, get in those Challenge Cup Finals and Grand Finals and stay up the top end of the table.
“I want to be a part of that."
Ever-present Yates, who helped Giants defeat Hull KR on Monday and takes on Wakefield Trinity at Magic Weekend this Sunday, added: "Me and Ian have been close for a while and he was a massive influence in me re-signing.
“He tried to get me to come when I was at London, and then brought me to Salford and has brought me across to Huddersfield.
“I've had a connection for three years now. I back him and he backs me. He's a big influence on the decision.
"We're getting there and you can see that with the young halves that we've got at the moment: doing the job, competing and winning games.
“With the injuries we've had this year, we've had a pretty big void to fill and the younger guys have stepped up and are playing with confidence and playing the type of footy that Ian wants to play with the type of mentality he wants.
"We're implementing the style that Ian wants very well and the younger players are playing the way that Ian Watson wants, and we'll bring in some more experience and that'll create competition for spots, which will have a knock on effect: we'll be more professional and more competitive internally which'll make us more competitive on the field."
Yates was named July’s Betfred Super League Player of the Month, played for the Combined Nations All Stars in their win over England in June and is also expected to be named in the 2021 Dream Team.
Watson added; "It was huge for us to get him in last year to help us educate the players in how we go about things.
“Luke Yates has been one of the best professionals I've had as a coach who really sets standards on and off the field in his preparation.
“He's huge in terms of where we want the group to get to and how we want to get there."
"His detail in his prep is excellent, and his work throughout the week sets the tone.
“The more people like that, the better the group is going to be. “To be a top team, you need top professionals and you need the younger lads to see how to perform and they follow their behaviours.
“His performances have been the best thing for me but the way he goes about things is very important. He's an important signing."