Two late goals saw Crystal Palace move to within a point of Watford and dent the hosts' automatic promotion hopes.
Paul Ifill illuminated a dogged clash with a moment of individual brilliance as he smashed a rising half-volley past hornets' goalkeeper Richard Lee.
And Palace doubled their lead just three minutes later as Victor Moses' low shot sneaked under Lee.
Watford have now won just once in their last 12 games, while Palace are in pole position for the final play-off place.
• Watford manager Aidy Boothroyd:
"I genuinely believe that it will go to the wire. It's a blow but we can't keep relying on everyone else around us to mess it up.
"I think first place is gone now but second is still very much up for grabs. We've created enough to win two or three games.
"I knew what Palace would be able to do and there's always a chance of creating with the pace they've got. We've created some unmissable chances and missed them. If you do that then that is what you get. We should have won 4-0."
• Crystal Palace manager Neil Warnock:
"Stoke and Watford were my first two home games in charge and we got absolutely mullered in both.
"It was men against boys and I remember going into my office after the game with Aidy Boothroyd and telling him I didn't know what I'd done to deserve this.
"I couldn't see us scoring a goal never mind getting a win. We were in the mire but we have changed attitudes and gone on this run.
"We have deserved the right to be the team that nobody wants to play in the play-offs - but we're not getting carried away."
Watford: Lee, Doyley, Bromby, Shittu, Stewart (Ellington 88), Smith, Eustace, O'Toole, McAnuff (Sadler 73), Henderson, Priskin.
Subs Not Used: DeMerit, Williamson, Kabba.
Booked: O'Toole, Shittu.
Crystal Palace: Speroni, Lawrence (Butterfield 20), Hudson, Fonte, Hill, Soares, Derry, Watson, Sinclair (Ifill 66), Moses, Morrison (Fletcher 84).
Subs Not Used: Hills, Scannell.
Booked: Morrison, Soares, Speroni, Butterfield.
Goals: Ifill 72, Moses 75.
Att: 17,694.
Ref: Howard Webb (S Yorkshire).
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