Corry Evans gave them a foothold in the third minute and Robert Koren netted late on to double the advantage.
Watford bossed the exchanges in between - Danny Graham twice foiled by Brad Guzan and Will Buckley hitting a post - but Malky Mackay's men were left frustrated.
Martin Taylor headed home a consolation to give City the jitters, however they held on to record a 2-1 win and stretch their unbeaten run on the road to 15 matches.
It was a must-win encounter for two teams seven points shy of the play-offs prior to kick off and separated by one place in the table.
Source: PA
Source: PA