Watford had to settle for a point after Marlon King had a penalty saved.
King made up for his missed penalty with an equaliser
King was denied from the spot just after the hour mark but scored a brilliant overhead kick minutes later to earn Watford a draw.
Watford initially opened the scoring when Adam Johnson slipped in a deceptive shot in the fourth minute.
But Clive Platt fired home an equaliser 16 minutes later before his strike partner Kevin Lisbie put them ahead at the start of the second half.
Watford manager Adrian Boothroyd:
"If you look at the way we played when we were in the Premier League
and the way we play now we are better with the ball now.
"We would get it and then give it away higher up the pitch but we look at it
now and we have that ability to retain possession.
"We are improving but we are not the finished article yet."
Colchester boss Geraint Williams:
"A lot of teams could have gone under after the start we had but we stood up
to it and showed an excellent response to take a point on merit.
"We came back and not only stood up to the pressure but created some good opportunities ourselves.
"The character the players showed today showed that and they were all very
proud to wear the Colchester shirt."
Watford: Lee, Doyley, Mariappa, Shittu, Stewart (Ellington 85), Smith, Williamson, Mahon, Johnson, King, Darius Henderson.
Subs Not Used: Poom, Priskin, Jackson, O'Toole.
Goals: Johnson 4, King 64.
Colchester: Gerken, Duguid, Balogh, Granville, Baldwin, Watson (McLeod 85), Izzet, Yeates, Jackson, Lisbie, Platt.
Subs Not Used: Cousins, Elokobi, Guttridge, Guy.
Goals: Platt 20, Lisbie 46.
Ref: Neil Swarbrick (Lancashire)