Four more goals followed in the second half, two of them via Sterling to become the fourth player to net a treble in the showpiece fixture, while substitute Kevin De Bruyne and Gabriel Jesus were also on target.
Relive how the 90 minutes of action unfolded with Sports Mole's live text coverage below.
City are aiming to become the first English side ever to win a clean sweep of all three domestic trophies on offer, having already lifted the EFL Cup and Premier League.
The Hornets finished 48 points below their opponents in the league, but this will still go down as a famous campaign for Javi Gracia's men - even more so if they spring an almighty upset to lift the cup for the first time in their history.
We will have all the bases covered over the next three hours or so, and where better place to start than by checking out some confirmed team news!
STARTING XI: Ederson; Walker, Kompany, Laporte, Zinchenko; Bernardo, Gundogan, D.Silva; Mahrez, Jesus, Sterling
SUBS: Muric, Danilo, Stones, Aguero, De Bruyne, Sane, Otamendi
Riyad Mahrez is preferred to Leroy Sane in the frontline, meanwhile, meaning that Bernardo Silva will be deployed in a deeper midfield position, alongside makeshift holding midfielder Ilkay Gundogan and club legend David Silva.
Fernandinho has not been used since injuring his knee on April 24 and is not in the squad at all today, while De Bruyne - used for the final 10 minutes at Brighton & Hove Albion last weekend - is only deemed fit enough for a place on the bench.
Two big blows, of course, but City have coped well without both men in recent weeks - even longer in the case of De Bruyne, in what has been a frustrating campaign.
There is no suggestion that this will be anything other than the usual 4-3-3 from Guardiola, though he did set up slightly differently prior to conceding at the Amex Stadium last week. For what it is worth, City have scored 163 in all competitions this term - a staggering amount of goals.
STARTING XI: Gomes; Femenia, Cathcart, Mariappa, Holebas; Deulofeu, Capoue, Doucoure, Hughes, Pereyra; Deeney
SUBS: Foster, Janmaat, Cleverley, Success, Masina, Gray, Kabasele
Craig Cathcart and Kiko Femenia retain their places in the backline, while Jose Holebas is also selected after the red card he received against Fulham for a last-man challenge was overturned in midweek.
Deulofeu's reward for his two-goal showing from the bench against Wolverhampton Wanderers is a starting spot this time around, and he could well be the man to watch from the Hornets' perspective. The last thing Kompany will want is the Barcelona academy product charging at him.
Deeney will look to rough up City's back four and Deulofeu has the ability to get in behind and create some magic out of nowhere - just ask Wolves supporters! Slightly deeper, meanwhile, Roberto Pereyra and Will Hughes will be tasked with creating chances.
The Brazilian striker has been directly involved in five goals in his five FA Cup appearances this season, scoring three and assisting two.
Having already defeated Chelsea in a dramatic EFL Cup final clash here in February, as well as finishing a point clear of Liverpool in a remarkable Premier League title race, there is just one more hurdle left for Guardiola's men to leap over.
As well as potentially winning the treble this term, the Citizens also recorded a record-breaking centurion campaign last time out. Yet it was arguably their ability to hold off Liverpool this season – officially the best runners-up in English top-flight history – that was the greater of the two achievements.
It has not quite been the perfect season, though, as City once again fell short in the Champions League, losing 4-4 on away goals to domestic rivals Tottenham Hotspur in a quarter-final clash that will live long in the memory. Ending their European hoodoo can wait for another year - today is all about maintaining their dominance of the English game.
That was an almighty shock, and it was not the first time they have lost to the Latics in the FA Cup in recent times, either, as they also lost the 2013 final here - a defeat that was extremely tough for City's supporters to take.
The 4-1 scoreline suggests Guardiola's men eased past the League Two side, but that was not the case as they had to really dig deep at times. Then came a 3-2 victory against Swansea City in the quarter-finals - a day that City were given an almighty scare as they trailed 2-0 at the Liberty Stadium with a little over 20 minutes to go.
As it was, Bernardo and Aguero struck either side of Kristoffer Nordfeldt's own goal to send the English champions through to the semi-finals, where they beat Brighton 1-0 - Jesus, a starter today, scoring the only goal of the match four minutes in.
They have won the competition five times, though only once - in 2011 as they brushed aside Stoke City - during the Abu Dhabi era. That, when considering how good they have looked in recent times, is a pretty underwhelming return and one they will be looking to put right today.
Guardiola's men are the overwhelming favourites, though they have showed time and time again over the last two seasons that they can more than justify that tag. Yet, that said, the defeats to Wigan in this competition over the last six years will also be fresh in the memories of City's supporters inside Wembley today.
The Citizens also lifted the EFL Cup here in February with victory over Chelsea - a match best remembered for Kepa Arrizabalaga's refusal to leave the field - so they are now just one win away from making this the most dominant season ever seen in English football.
Man City have eliminated Watford from the FA Cup in each of their previous three ties, winning 3-1 in 1996-97, 3-0 in 2012-13 and 4-2 in 2013-14. The Hornets' only elimination of City in the this competition came in the 1985-86 season in the fourth round.
Gracia's men have lost their last 10 matches against the Citizens in all competitions, conceding 32 goals in those games. They are winless in 15 matches against the Citizens overall since a 1-0 win in March 1989 in the second tier.
Watford do not exactly have the best of records in this fixture, then, although we are so often told that stats such as those count for little on cup final day. Guardiola has talked up Watford over the past couple of days and has been right to do so.
Then Gracia brought on Deulofeu and everything changed. The Spanish attacker came on with 25 minutes of normal time left to play and exited the field having struck twice, either side of Deeney's penalty, to set up this final with City.
That is not to say they have written off today as a bonus, though. When cup final appearances are this rare, with a three-decade gap since they last reached this stage, you can never have that attitude. Victory for Gracia's men today and each of them will become heroes in an instant.
There is more than just a cup on the line in that regard, then, as the return of European football at Vicarage Road is also up for grabs. A Watford win would also mean Manchester United having to play a qualifying match to even reach the Europa League, so they will have a close eye on events at Wembley.
Gracia heavily rotated his side for all the matches up to the semi-final stage, leading to criticism from the outside, though he will rightly point out that his decision to chop and change has ultimately paid off.
However, the Hornets' bottom-half finish can still be considered a little disappointing as the Hertfordshire outfit lost three league games in a row at the end of the season and went four without a win as their Premier League campaign fizzled out.
Their only previous final appearance came in 1984 under manager Graham Taylor when losing 2-0 to Everton at the old Wembley. Now, after more than three decades of waiting, they have a chance to put that right today.
This will be the first FA Cup final between two managers of the same nationality since 2008 (Dave Jones and Harry Redknapp). It's only the second time it's happened when the managers are not British, with the other being in 2001 between Frenchmen Arsene Wenger and Gerard Houllier.
Either Pep Guardiola or Javier Gracia will become the third Spanish manager to win the FA Cup, after Rafael Benitez (Liverpool, 2006) and Roberto Martinez (Wigan Athletic, 2013).
With kickoff now less than five minutes away, let us check out some pre-match thoughts from both camps.
Javi Gracia: "I will be proud of my players whatever happens today. I don't need to play in a final to be proud of them. There's already a lot to be proud about this season, a lot we've been able to share with our supporters.
"Sometimes you can get a result to be even more proud but we are already satisfied with what we have done before. Now it's the moment to enjoy this match, and try to win it."
Pep Guardiola: "It's always difficult [selecting my team]. Gabriel Jesus is an incredible guy - you cannot imagine his mood in training; he is a fighter and he has played all the competition and scored a lot of goals and scored up to the final so he deserves to play.
"There are many other players like Nico [Otamendi] and John [Stones], so it's difficult for me to choose the right XI for the game, but it is what it is."
A reminder that both teams have made changes to their starting lineups - Jesus replacing Aguero for Man City; Mariappa and Gomes coming in for Kabasele and Foster for Watford.
We will now pause for the national anthem, before the real business gets under way.
The Hornets, hoping for a better outcome this time around, get us up and running at Wembley Stadium!
Central-defensive teammate has other ideas, though, and sends his long-ranger high over the crossbar.
The ball is squared in the direction of Jesus but Cathcart is there to deal with the danger. That is the liveliest moment of the match so far.
Gracia will be pleased with the start Watford have made to the game.
The set-piece should have been a simple one for Gomes to deal with but he drops the ball. Thankfully for him, Mariappa was there to clear up.
Ederson deserves huge praise for closing down the angle and blocking Pereyra's shot from inside the box.
Following a scramble in the box, City - second best so far - manage to get the ball clear.
Up the other end of the field, the ball is sent into the box but Gomes keeps hold of it.
Silva and Sterling both win headers - another rarity - and the Spaniard sends his shot into the bottom corner once teed up by his teammate. A good finish but an undeserved lead for the Citizens.
Gracia will be keen for his side to keep things tight for the time being to keep the cup final alive.
The Citizens are looking a lot more comfortable now than they did before Silva's goal. You have to wonder if a second will follow before half time.
City are starting to tighten their grip on the tie.
City win their seventh corner of the match, which is worked short and nodded behind for corner number eight.
Bernardo lifts the ball towards the back post, Jesus flicks it goalwards with a first-time shot and Sterling helps it on its way over the line.
It is officially awarded to Jesus but I think it will be credited to Sterling at some point as the ball did not appear to be over the line before he pounced.
The Citizens have looked a lot more like their usual selves over the last 15 minutes. Watford look overwhelmed and risk shipping a third before half time.
That does not look like being the case today, though, as City are in control of the ball and still look as though they have another gear to move into should they need to.
The Hornets are enjoying the odd positive moment, though, with Femenia's shot taking a deflection on its way through for their first corner of the evening.
They recovered from a couple of goals down in the semi-finals, though, so this one is not over yet.
Watford hit their opponents on the counter and Gerard Deulofeu was played in down the left by Abdoulaye Doucoure, before shifting it into the middle for Roberto Pereyra.
The Argentina international's first touch set him nicely, but Ederson closed down the angle and made the save with his leg.
That goal ended a run 27 games and 2066 minutes since Silva last found the net, and it transformed City as they looked a lot more like their usual selves from that point on.
It could have been 3-0 at the interval as Riyad Mahrez had a powerful shot kept out, but as things stand there is still hope for Gracia's men - just!
MAN CITY SUBS: Muric, Danilo, Stones, Aguero, De Bruyne, Sane, Otamendi
WATFORD SUBS: Foster, Janmaat, Cleverley, Success, Masina, Gray, Kabasele
The Hornets created one big chance in the first half and can make it game on if they score the next goal.
A positive start to the second half for Watford, nonetheless!
Jesus finds the back of the net with his header from the corner but he was stood in an offside position.
Jesus flicked Bernardo's cross past Gomes and it would have crossed the line had Sterling not got to it first.
Sterling is now the first player to both score and assist a goal in an FA Cup final since Alexis Sanchez for Arsenal against Aston Villa in 2015.
Pereyra's shot 11 minutes in remains the Hornets' only attempt on target all evening. Gracia could do with making a change.
The Hornets are dominating possession now, which is strange to see against City, but at the same time the Citizens have their opponents right where they want them.
De Bruyne is on for Mahrez with 10 minutes of the second half played.
The match has become incredibly open all of a sudden.
The Belgian playmaker dummied his shot, leaving Gomes looking a little silly, and then converted into an unguarded net.
The Citizens look as though they have one or two more in them, too, as it is Guardiola's men who are asking all of the questions.
The Brazilian cushions the ball down for De Bruyne, who slips the return pass through for his teammate to take in his stride and charge towards goal.
With just compatriot Gomes to beat, he coolly sends his shot into the back of the net.
Watford just want the full-time whistle now - what a shame because they looked very bright for the first 20 minutes or so.
Gundogan has picked up an injury and, with no holding midfielders in the squad, is replaced by winger Sane.
Watford would happily accept the full-time whistle before things get embarrassing.
Watford's players are looking incredibly tired, having been made to chase the ball for the best part of an hour now.
Bernardo fizzes the ball in from the left and Sterling converts from inside the six-yard box. Gomes gets a couple of hands to the ball but can only push it into the roof of his net.
The Citizens are not taking their foot off the gas, sensing that there is history to be made here if they were to score a sixth to match Bury's 6-0 win from 1903.
Still City come forward, refusing to give up in their pursuit of a sixth goal. They have around five more minutes to score it.
De Bruyne teed up the English attacker, whose initial shot was pushed on to the post by Gomes, only for Sterling to react quickest to the rebound.
De Bruyne has just been named as Man of the Match, despite spending the first 55 minutes or so sat on the bench!
It was all about the Citizens' quality in front of goal from that point on, though, as Sterling helped himself to a hat-trick and Silva, De Bruyne and Jesus also registered in the one-sided final.
An on-the-whistle report can be found by clicking here, and be sure to stick around as we bring you reaction from both camps elsewhere on the site.
Otherwise, we will be back tomorrow with updates from the La Liga games involving Real Madrid and Barcelona. See you then!