Robbie Blake's double-strike sank nine-man Watford as Leeds leapfrogged the Hornets into third place.
Watford's James Chambers tackles Liam Miller
Ashley Young fired Watford ahead with a superb free-kick into the top corner.
But Blake equalised from the spot when Hornets keeper Ben Foster was dismissed for fouling Rob Hulse after a poor back-header by Jordan Stewart.
Things got worse for Watford soon after when Darius Henderson was sent off for clashing with Sean Gregan, before Blake grabbed the winner from close range.
Watford came into the game in a rich vein of form, having won their last six games, scoring four goals in each of their three previous outings.
But they found it more difficult to break down a determined Leeds side who were just two points behind them in the table at the start of play.
And there was little goalmouth action until Young found the net from the edge of the area to put Watford in front on 40 minutes.
Leeds responded well and Foster had to save well from Blake and Eddie Lewis before the break, while Sean Gregan headed against the bar.
But the game was turned on its head after the interval when Leeds equalised and Watford had two men dismissed in the space of four minutes
On 57 minutes Stewart tried to head back to Foster but the ball fell short and Hulse nipped in, only to be felled by the keeper who was then shown the red card.
Blake brought Leeds level from the spot, beating veteran keeper Alec Chamberlain who had replaced Chris Eagles.
Watford's woes increased on 61 minutes when Darius Henderson became their second player to be dismissed after clashing with Sean Gregan.
The Hornets did not roll over however - and they held out until the 81st minute when Marlon King lost the ball during a rare attack by the visitors.
Chamberlain did well to save David Healy's shot from Richard Cresswell's cross, but he had no chance as Blake followed up to give Leeds all three points.
Leeds boss Kevin Blackwell:
"We came out in the second half and really got the ball moving in the second half.
"We knew Watford would be direct in the first half but I told the lads we couldn't play like that.
"All we can do is keep the pressure on Sheffield United and see where we are around Easter time."
Watford boss Adrian Boothroyd:
"Even with nine men we gave it a go and we've got some very big-hearted men in there who fight and scrap.
"That's one of the reasons we're up there. The fact we held out for so long, I take a lot of pleasure from."
"We all get setbacks in life - it's how you react to them. We need to do that against Brighton on Saturday."
Leeds: Sullivan, Kelly, Butler, Gregan, Crainey, Miller, Derry, Douglas (Healy 74), Lewis, Hulse (Cresswell 74), Blake.
Subs Not Used: Bennett, Einarsson, Walton.
Goals: Blake 60 pen, 81.
Watford: Foster, Doyley, Mackay, DeMerit, Stewart, Eagles (Chamberlain 58), Bangura (Mariappa 75), Chambers, Young, King (Bouazza 83), Henderson.
Subs Not Used: McNamee, Diagouraga.
Sent Off: Foster (57), Henderson (61).
Booked: Chambers, Bangura.
Goals: Young 40.
Ref: M Jones (W Yorkshire).