Sarr has not played for the Hornets since November 20 against Manchester United when he suffered a knee injury.
Nonetheless, the 23-year-old has been named in the Senegal squad for the tournament, which runs from January 9 to February 6.
A club statement read: "Ismaila Sarr suffered a knee ligament injury on November 20 in the match against Manchester United and has not been fit to play for Watford FC since that date.
"In early December, the Club wrote to the Senegal Football Federation outlining the clinical diagnosis of Ismaïla's injury and immediately followed that up by supplying the MRI scans detailing the extent of the injury. After further consultation with medical experts, we informed the Federation of Ismaila's rehabilitation process and likely timeframe of recovery.
"Within the past 10 days, the Club has reiterated to the Senegal Football Federation the player's current medical status and recovery schedule.
"The Hornets have also invited the Senegal Football Federation to instruct their own independent surgeon to confirm the diagnosis and rehabilitation period."
Watford are also in a row with Nigeria over their refusal to release Emmanuel Dennis for the tournament.
