Goals in each half from Leroy Sane and Riyad Mahrez secured all three points for the champion, which was again without the injured Sergio Aguero and left the in-form Raheem Sterling on the bench at Vicarage Road.
Abdoulaye Doucoure had them worried in the closing stages after Fabian Delph lost possession near his own penalty area, but City soaked up the late pressure to hold onto the lead.
The result puts City five points ahead of second-place Liverpool, having played a game more, and means Watford have now lost seven matches in a row against Pep Guardiola's side.
Ben Foster did superbly to deny Mahrez and stop Bernardo Silva and David Silva from following up on the rebound, but Troy Deeney spurned Watford's best opening of the first half when he failed to beat Ederson's outstretched leg from eight yards out.
Sane punished that miss five minutes before the break, turning home Mahrez's curling cross from the right with his chest after Foster had thwarted David Silva moments before.
It was a goal that seemed to sap some life out of the home fans and any hope of a comeback was seemingly quashed six minutes after the break, when Mahrez swept home Gabriel Jesus' cross when unmarked in the box.
Jesus wasted two clear chances for a third, heading Bernardo Silva's flick-on over the crossbar before clipping a tame finish wide of the right-hand post, but they were not left to rue those misses despite Doucoure scrambling the ball home with six minutes left.