A frantic first half swung the Hornets' way courtesy of two goals in as many minutes, with Troy Deeney's finish followed up by a powerful strike from range by Nathaniel Chalobah.
The Foxes rallied after the break and reduced the deficit through Harry Kane, but were unable to find a late equaliser.
Here, Sports Mole dissects a crucial win for the Hornets in the chase for second place.
On target: 4
On target: 6
Was the result fair?
On reflection Watford probably just about edged a tight affair and deserved to triumph after a devastating display on the counter before half time. Leicester were physical and effective for long spells but ultimately all their hard work was undone by two minutes of madness before the break.
Nigel Pearson can be proud of his side's spirited fightback despite a hugely disappointing defeat. The home side probed without creating before the break, but showed character to rally in the second half at 2-0 down. David Nugent and Kane had a huge impact and put an experienced Watford backline under huge pressure late on, but it was too little too late for the Foxes.
The Hornets demonstrated exactly why they have the Championship's best away record with a clinical, effective display. Chalobah, Ikechi Anya and Almen Abdi helped the visitors control the match early on, with Watford happy to commit men forward at breakneck speed on the counter. A stuttering finish threatened to undermine their impressive passing approach, but Joel Ekstrand and Daniel Pudli kept their cool with some spirited rearguard action late on.
Sports Mole's man of the match
Nathaniel Chalobah: The youngster capped an impressive performance full of running and intent with a truly special strike before the break. A powerful, instinctive drive worthy of winning any match underlined the 18-year-old's all-action display and added to his growing reputation in Hertfordshire.
Craig Pawson enjoyed a largely consistent game, allowing a frantic start to flow before being forced to book a string of players in the second half. Leicester felt hard done by when Matty James had a penalty appeal turned down, but a debatable call could have gone either way.
A collective shambles for Leicester in an attempt to defend a corner kick before the break takes this award hands down. The home side completely switched off despite having two chances to clear their lines and paid a heavy price as Deeney slotted home from close range. The shellshocked Foxes could have conceded twice more before the break in a period which ultimately cost Pearson's side the match.
Leicester: Pearson will be relying on other sides to keep his side's faint playoff hopes alive on the final day in a trip to Nottingham Forest.
Watford: Zola's men could still be fighting for automatic promotion next weekend when Leeds United travel to Vicarage Road.