Leaders Watford moved six points clear of second-place Bristol City to leave Palace rooted in the relegation zone.
Watford beat Palace to secure a fifth successive league win
Watford took a first-half lead after Julian Speroni saved well from Marlon King, but was unable to prevent Tommy Smith from lashing in the rebound.
Striker King scored his fifth goal in five games with a low shot following a dazzling run from Adam Johnson.
Soon afterwards the highly-rated John Bostock, 15, came on as a substitute to become Palace's youngest ever player.
Bostock does not turn 16 until January 2008, but the youngster showed why he has already played for the England Under-17 team and been reportedly linked with moves to Manchester United, Arsenal, Liverpool and Spurs.
In the 18 minutes he was on the pitch he passed the ball well, showed good awareness, as well great strength in the tackle.
The win over Palace was Watford's fifth successive league win and pushed them nine points of third place West Brom.
Crystal Palace manager Neil Warnock:
"I thought Bostock did well.
"He has got a cultured left foot, but he got a bit cocky and I had to tell him off when he tried to showboat.
"I'm delighted with our performance as we gave everything."
Watford manager Adrian Boothroyd:
"Nothing's done yet, it's not even Bonfire Night yet.
"We have to make sure we keep it steady and keep our heads down.
"I'm very pleased as we weren't at our best, but it's great to win when you're not playing well."
Crystal Palace: Speroni, Lawrence, Hudson, Fonte, Hughes (Morrison 72), Hills, Fletcher, Watson (Bostock 72), Songo'o, Scowcroft, Freedman (Idrizaj 66).
Subs Not Used: Martin, Swaibu.
Watford: Lee, Stewart, Shittu, DeMerit, Doyley, Mahon, O'Toole, Johnson, Smith (McAnuff 68), King (Ellington 75), Darius Henderson (Priskin 75).
Subs Not Used: Loach, Mariappa.
Goals: Smith 32, King 67.
Ref: Keith Stroud (Hampshire).