Blues snatched a huge victory at Vicarage Road to go four points clear of third placed Sheffield United ahead of their trip to Burnley on Monday night.
Cameron Jerome stepped off the bench to grab the game's decisive strike - his tenth goal of the season - with 17 minutes left to play to earn a deserved three points for Alex McLeish's men, who dominated the game for long spells.
They began with a real intent and controlled the opening exchanges.
Skipper Damien Johnson and Keith Fahey both saw shots blocked early on before striker James McFadden, one of three changes to the side, forced home keeper Scott Loach into a good save low down to his left from the edge of the area.
Garry O'Connor was making his presence in attack felt too, latching onto an incisive pass from Lee Bowyer and scrambling the ball wide of goal after showing good strength to shrug off Mike Williamson.
Loach had to be on his toes again moments later to keep out a weak shot from O'Connor before Sebastian Larsson stung the young keeper's fingers with a powerful effort from 25-yards.
Watford had to wait until midway through the opening period for their first sight of goal, right-back Lloyd Doyley picking up the ball 30-yards from goal and letting fly only for the ball to whistle wide of Colin Doyle's right-hand post.
A superb block from Hornets captain Jay DeMerit stopped a fierce drive from Bowyer from finding the top corner before Doyle tipped over Jobi McAnuff's and then clutched Tommy Smith's back-post strike to his chest at the other end.
The bobbly Vicarage Road surface was causing problems with both sides misjudging bouncing balls and instead opting for the more direct route to goal.
That said there was nothing direct about Blues next chance as Larsson played a lovely one-two with Bowyer before unleashing a low shot on the volley which Loach managed to block with his legs.
And from the resulting corner, the industrious Bowyer, not for the first time proving a nuisance of himself in the opposition area, had Loach at full stretch to parry a stinging drive with his unfavoured left-foot from 20-yards.
On the stroke of half-time O'Connor flicked Fahey's inswinging corner over the crossbar as the visitors went in at the break counting themselves unlucky not to be ahead.
Half-time: Watford 0 Blues 0
The home side introduced striker Grzegorz Rasiak for the second-half and the move almost paid immediate dividends when the Pole sent a teasing ball across the face of goal which Danny Rose could only lash high and wide at the back post.
Fahey tried his luck from long-range as Blues looked to pick up where they left off in the first half, the Irishman spotting Loach off his line after the keeper scuffed a kick but curled wide of the target.
Larsson was adamant Blues should have had a penalty when his cut-back from the byline appeared to strike the arm of Williamson while a vital interception from Adrian Mariappa at the back-post foiled O'Connor's attempts at getting a header in on goal.
But for all their attack, Blues were indebted to their goalkeeper on the hour mark.
Following a well worked move down the right McAnuff crossed for Rasiak, who rose highest and sent a powerful header on goal which Doyle flew across to his right to turn around the post.
Kevin Phillips replaced a tiring Larsson and O'Connor left the field for Cameron Jerome as boss McLeish attempted to pep up his attack, but Watford were enjoying their best spell of the game as Radhi Jaidi and then Franck Queudrue were forced to head dangerous crosses behind for corners.
But, perhaps slightly against the run of play, Blues finally got the goal their endeavours so richly deserved in the 73rd minute.
Jerome used his pace to latch onto a Johnson throughball and get in behind the home rearguard but looked to have carried the ball too far wide, however he cut back and jinked his way past a defender before arrowing a fierce drive with his right-foot which took a deflection before hitting the far corner and consequently sent the 2,017 travelling support behind the goal into raptures.
Jerome could have even grabbed a second minutes later when Phillips sent him clear, but this time he unselfishly passed to McFadden, who couldn't find a way past DeMerit.
Watford pushed men forward in search of a response but the Blues back-line, now including the on loan Djimi Traore after Queudrue limped off with a knock, stood firm to withstand an aerial bombardment while Doyle eased the pressure by collecting a corner through a crowd of players.
The final whistle was greeted with jubilation from the visiting supporters and victory now puts the pressure on Sheffield United to win at play-off chasing Burnley as the race for automatic promotion hits the final turn.
Full-time: Watford 0 Blues 1
Blues (4-4-2): Colin Doyle; Stephen Carr, Radhi Jaidi, Franck Queudrue (Djimi Traore, 85), David Murphy; Sebastian Larsson (Kevin Phillips, 64), Damien Johnson (c), Lee Bowyer, Keith Fahey; Garry O'Connor (Cameron Jerome, 71), James McFadden. Subs: Dean Lyness (gk), Hameur Bouazza.
Booked: None
Watford (4-4-2): Scott Loach; Adrian Mariappa, Mike Williamson, Jay DeMerit, Lloyd Doyley; Jobi McAnuff, Ross Jenkins, Jack Cork, Danny Rose (Jon Harley, 59); Tommy Smith, Will Hoskins (Grzegorz Rasiak, 46). Subs: Richard Lee (gk), Alex Cauna, Andrei Stepanov.
Booked: None
Attendance: 16,180 (2,017 Blues fans)