Blues reached the semi-final stage of the competition last season.BCFC
The Hornets are currently in sixth spot in the PDL South Division, with Blues in the same position in the PDL North.
Under the management of Steve Spooner, Blues reached the semi-final stage of the competition last season, where they were beaten over two legs by Chelsea.
The London Blues went on to lift the trophy for a fifth year in succession by trouncing Arsenal 7-1 over two legs in the final.
Watford went out to Blackburn Rovers in the fourth round of last year's Youth Cup.
The tie between Watford and Blues will take place on a date before 15 December 2018, and at venue still to be confirmed.
The full FA Cup third round draw is as follows:
1 Sheffield Wednesday v Stoke City
2 Blackburn Rovers v Cheltenham Town or Gillingham
3 Everton v Sunderland or Oldham Athletic
4 Burnley v Oxford United or Barnet
5 Huddersfield Town v Peterborough United
6 Watford v Birmingham City
7 Preston North End v Charlton Athletic or Southend United
8 Leicester City v Fulham
9 Arsenal v Northampton Town or Swindon Town
10 Accrington Stanley or Notts County v Leeds United
11 Wolverhampton Wanderers v Wigan Athletic
12 Hull City v Cardiff City
13 Maidenhead United v Nottingham Forest
or Torquay United
14 Middlesbrough v Sheffield United
15 Bristol City v Salford City or Crewe Alexandra
16 West Bromwich Albion v Lincoln City or South Shields
17 Liverpool v Cray Wanderers or Portsmouth
18 Manchester United v Chelsea
19 West Ham United v Brighton & Hove Albion
20 Southampton v Rotherham United
21 Aston Villa v Swansea City
22 Blackpool v Derby County
23 Ipswich Town v Wingate & Finchley or Andover Town
24 Bolton Wanderers v Newcastle United
25 AFC Bournemouth v Mansfield Town or Chester
26 Stevenage or Exeter City v Bury
27 Cogenhoe United or Coventry City v Crystal Palace
28 Millwall v Tottenham Hotspur
29 Port Vale or Sutton Coldfield Town v Norwich City
30 Clevedon Town or Sutton United v Manchester City
31 Queens Park Rangers v Rochdale or Milton Keynes Dons
32 Yeovil Town or Cambridge United v Reading