Rickie Lambert scored two penalties and strikes from Guly Do Prado and Lee Holmes ensured Nigel Adkins' side, who still have a 100 percent home record, moved two points clear at the top.
Adrian Mariappa, Jonathan Hogg and Joe Garner all had chances to put Watford in front before John Eustace, under pressure from Lambert, handled in the area in the 22nd minute.
Lambert slotted home the penalty and he made no mistake when he was presented with the second penalty after being hauled down by Mariappa in the 55th minute.
Guly ensured there was no way back for Watford with a fine finish in the 70th minute, while substitute Holmes wrapped up the win with a superb strike from long range late on.
Middlesbrough couldn't stay in touch with Southampton after their third successive goalless draw, this time against Reading at the Madejski Stadium.
Reading's Australian goalkeeper Adam Federici produced a superb double save to deny Scott McDonald and Marvin Emnes, while Adam Le Fondre and Simon Church went close for the Royals.
Marvin Emnes and Barry Robson both hit the post late on as Tony Mowbray's visitors piled on the pressure.
John Carew's late equaliser preserved West Ham's unbeaten away record as they twice came from behind to draw 2-2 with Crystal Palace at Selhurst Park.
Darren Ambrose put the Eagles ahead on six minutes following woeful West Ham defending.
Kevin Nolan equalised on 16 minutes, heading home unmarked from close range for his third West Ham goal.
Glenn Murray put Palace back in front seven minutes after half-time as he beat on-loan Arsenal goalkeeper Manuel Almunia with a composed finish from 15 yards.
But the Hammers levelled again in the 80th minute as George McCartney crossed for Carew to head past Julian Speroni from close range for his first goal since switching to Upton Park from Aston Villa.
Michael Chopra bagged a brace as Ipswich came from behind to beat Brighton 3-1 at Portman Road.
Chopra's double condemned fifth placed Brighton to their second defeat of the week after Tuesday's 3-1 home loss against Crystal Palace.
Nick Barmby scored his first goal of the season to extend Hull's unbeaten run to six matches as the Tigers beat Cardiff 2-1 at the KC Stadium.
Veteran midfielder Barmby kept his composure to convert a fine cross from Robbie Brady in the 71st minute and send the Tigers into the top six after Cardiff youngster Joe Ralls cancelled out Matt Fryatt's opener.
Elsewhere, Blackpool increased the pressure on Bristol City boss Keith Millen with a 5-0 win over the division's bottom side.
Millwall are second bottom after a 1-0 home defeat against Burnley, while Coventry are also in the relegation zone following a 2-0 loss at Barnsley.
Leeds secured a 1-0 win over Portsmouth and Doncaster's revival under Dean Saunders continues as they beat Peterborough 2-1.
Source: AFP
Source: AFP