Martyn Waghorn fired the Foxes ahead from the penalty spot in the 36th minute, although the visitors were furious at referee Nigel Miller's decision to award a foul against Jay DeMerit.
Paul Gallagher added a stunning second soon after to put Leicester in control, and even though Steve Howard saw red for a wild challenge on Ross Jenkins, Nigel Pearson's side pulled further clear after the interval with goals from Jay Spearing and James Vaughan.
Martin Taylor pulled a goal back for the Hornets late on, but the damage had already been done.
The result ensures Leicester remain four points clear of seventh-placed Blackpool with two games remaining.
But Watford remain in serious danger at the other end of the table following a first defeat in four.
Leicester boss Pearson kept faith with the same side that defeated Peterborough 2-1 at London Road last weekend.
Jon Harley and Henri Lansbury returned from suspension for Watford, with Stephen McGinn and Heidar Helguson dropping to the bench.
The visitors were quick to settle and enjoyed the majority of possession early on.
Yet it was the Foxes who threatened first in the eighth minute as Gallagher tested Scott Loach with a speculative long-range effort.
Loach made another simple stop to deny Waghorn 10 minutes later following a flowing Leicester move.
At the other end, Danny Graham saw a curling shot fly narrowly wide from 20 yards before Jack Hobbs reacted well to block a goalbound effort from Lansbury.
Lansbury also forced Chris Weale into a useful save shortly before the half-hour as Watford started to grow in confidence.
But it was Leicester who went ahead in controversial circumstances nine minutes before the break.
DeMerit was penalised for a foul on Richie Wellens, despite appearing to take the ball with his challenge, and Waghorn made no mistake with the resulting spot-kick.
The home side doubled their lead five minutes later as Gallagher lashed home a superb left-footed volley from the edge of the area.
Watford's hopes of mounting a comeback were lifted when Howard received a straight red card on the stroke of half-time for a lunging tackle on Jenkins.
But it was Leicester who struck again six minutes after the interval, Spearing applying the finish after the Hornets had failed to deal with a bouncing ball in the area.
Vaughan, on as a replacement for Gallagher, wasted a clear chance to add a fourth for the hosts as he fired straight at Loach following good work from Waghorn.
However, the on-loan Everton youngster did manage to get on the scoresheet in the 67th minute when he held off his marker before finishing coolly.
Watford substitute Taylor reduced his side's arrears 13 minutes from time with a header from Michael Bryan's corner, but Leicester were already home and dry.
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