The Reds went to Vicarage Road on the back of 18 successive league wins, one short of setting a new record, but they were nowhere near their best as Watford ran out deserved winners.
Ismaila Sarr was the star of the show, scoring Watford's first two and then teeing up Troy Deeney for the clincher 17 minutes from time, all three goals coming after the lively Gerard Deulofeu was forced off with a potentially serious knee injury.
Liverpool rarely threatened Ben Foster's goal and Van Dijk accepts the Reds simply were not good enough, with the Dutchman particularly critical of the manner of the loss.
"If you concede three goals – that's something we didn't do for quite a while – obviously we have to improve as a team in total, and we will," Van Dijk told Sky Sports.
"It's tough to take this one. I think the only positive is we have an FA Cup game [against Chelsea] in just a couple of days.
"In our last game, [we conceded] one set-piece, one good goal. Today [Saturday] it should be better, that is clear, but if you look at whole season we've been good defensively, I think we've the most clean sheets in the league.
"But we know there's room for improvement. That's the good thing about our mentality, we won't walk away from this either, we have to improve, do better.
"It's unacceptable that we lose here 3-0, in this way as well. The whole season we didn't lose a game like this, I think they did very well, but we should've done better. We want to strike back, and we will."
Defeat means Liverpool will be unable to go the entire season unbeaten, though Van Dijk insists such situations never went through the players' minds anyway.
When asked if the defeat or missing out on an 'invincible' season hurts most, Van Dijk said: "Losing hurts, the records are only for the media and everyone who is talking about it.
"We didn't mention it once. We keep going, we want to win our next match in the FA Cup, then we have Bournemouth at home and we want to strike back, show what we've been doing the whole season and that's the only way forward."
Despite the loss, Liverpool remain 22 points clear of Manchester City at the summit.