Lydiate hasn't played since breaking his ankle on regional duty against Edinburgh six months ago but Dragons boss Darren Edwards hopes to select his star six when they face the Scarlets on what should be another huge day for Welsh rugby.
"He's going through return to play protocols and is very close," said Edwards.
"He's had a few niggles, not just the ankle. He can only play when he's 100 per cent.
"Unfortunately, he strained a hamstring a couple of weeks back which has delayed his return.
"I'm almost certain he will be back for the Scarlets game. He's been training with us and there's enough experience in him to get him back out there.
"He should be a definite for the week after next."
As well as being a big boost for Edwards and all at Rodney Parade, the 25-year-old's imminent return is good news for Wales coach Warren Gatland as he gets set to name his British & Irish Lions squad to tour Hong Kong and Australia at the end of April.
Lydiate was being talked about as a certain tourist prior to his injury setback after he was named Player of the Championship as Wales stormed to a Grand Slam in last year's RBS 6 Nations.
He hasn't played international rugby since Wales' summer tour series Down Under, however, having missed all four autumn Tests and the recent Championship campaign that culminated in Saturday's stunning win over England.
If he does return against the Scarlets in Cardiff, Lydiate will have three games to prove his form and fitness ahead of Gatland's Lions selection announcement.
After the derby-day fixture on March 30, the Dragons travel to Ulster on April 12 and then host Munster on April 19, with Gatland set to name his squad on April 30.
Judgement Day - Millennium Stadium, Saturday 30 March
Dragons v Scarlets 2.30pm
Blues v Ospreys 5.15pm
Tickets: Adults £25, U18s £10, Family ticket £50 (two adults, two children)
Tickets are available from wru.co.uk/tickets; by calling Ticketmaster on 08442 777 888; from Ticketline, Westgate Street Cardiff tel 02920 230130; from the Blues and Dragons box offices; from the WRU store, 47 Westgate Street, Cardiff, and from selected Tesco stores around Wales.