The winner of the match will move to the top of the table with four games played.
The visitors took the lead with just six minutes on the clock as Andy Reid's fierce drive flew past Manuel Almunia.
Watford nearly drew level midway through the half, but Almen Abdi's strike was deflected narrowly wide of the Forest goal.
It was the away side's turn to threaten soon after when Adlene Guedioura fired wide, while Ikechi Anya missed the target at the other end.
Forest came withing inches of doubling their advantage at the end of the opening 45 minutes, but Henri Lansbury's shot across goal came back off the post before Troy Deeney missed a simple header for Watford.
You can follow Sports Mole's live text coverage of the second half here.