Dean Bowditch capitalised on hesitation in the Watford defence to open the scoring and James O'Connor doubled the lead before half-time.
After an aggressive second half, sub Dominic Blizzard headed the visitors back into the game after 77 minutes.
But, with the Hornets committing men forward, Jean-Louis Valois' injury-time strike confirmed a home win.
Watford manager Adrian Boothroyd:
"I'm a winner and therefore it is always disappointing when you lose, but there were a lot of positives and plenty for me to be encouraged about.
"In the second half I felt we were terrific and with a bit of luck we may even have got back on level terms.
"I know our predicament but I'm more interested in looking up and not down."
Burnley: Jensen, Cahill, Sinclair, McGreal, Camara, Oster (Valois 88), O'Connor, Hyde, Branch (Duff 81), Akinbiyi, Bowditch (Grant 81).
Subs Not Used: Coyne, Roche.
Goals: Bowditch 20, O'Connor 43, Valois 90.
Watford: Lee, Cox, DeMerit, Chambers, Smith (Darlington 73), Eagles (McNamee 73), Mahon, Gunnarsson (Blizzard 73), Young, Dyer, Bouazza.
Subs Not Used: Chamberlain, Doyley.
Goals: Blizzard 77.
Att: 11,507
Ref: M Pike (Cumbria).