The three-time Defensive Player of the Year has been on the team's preseason physically unable to perform list since the surgery to repair a herniated disk.
"I would say we're heading in the right direction," O'Brien told reporters Friday. "He certainly feels much better, obviously than he did two weeks ago. I don't think we're at the point today where we're going to say, 'we're going to activate him right now.' But I know that it looks decent for him to be able to play in the first game."
Watt has never missed a regular-season game, but he missed the 2012 preseason because of an elbow injury. He won his first NFL Defensive Player of Year award that year. Last year, he sat out the preseason as a preventative measure.
The 27-year-old Watt dealt with a number of injuries in 2015, including a herniated disk, a broken hand, a groin tear, and three adductor and two abdominal muscles tears. He had surgery abdominal surgery in January.
Despite those injuries, Watt won his third defensive player of the year award after recording 17.5 sacks last season.