Hornets forward Joe Garner found himself in on goal after just 10 minutes, but saw his left-footed shot hit the post and go wide.
Palace took over for the remainder of the half, but were unable to get on the scoresheet. Glenn Murray's header came closest just shy of the half-hour mark, but bounced harmlessly over the bar.
Dougie Freedman's side found the back of the net when Sean Scannell put the ball through for Wilfried Zaha on 60 minutes, and the forward struck the ball first time to find the top corner.
Palace sit sixth in the table, while Watford remain sixth from bottom.