After a poor start to the season, the Rams have been rampant in recent weeks and they claimed their fifth league win as goals from John Brayford and Shefki Kuqi added to Tomasz Cywka's double.
Matthew Whichelow had briefly given Watford hope of taking something from Pride Park when he netted to make it 2-1, but, in truth, the visitors were thoroughly outclassed.
The Rams went into the game on the back of three consecutive home wins and it showed as they enjoyed the better of the opening exchanges.
They nearly took the lead in the fourth minute as, after a clever one-two with Alberto Bueno, Tomasz Cywka released Paul Green, who raced clear before being brilliantly denied by Scott Loach.
The hosts' fluent counter-attacking approach continued to cause the Hornets problems with Green heading just over after good work from Bueno.
Derby soon got the goal their endeavour deserved, although it came from an unlikely source.
Green was involved once again, finding Brayford, who burst through the Watford backline before netting his first goal for the club with a sumptuous finish.
Going one up did not halt their flowing football, though, and they nearly grabbed another as Kris Commons hit just over.
Despite the visitors' best efforts, the one-sided nature of the game continued with Commons looking increasingly influential.
The Hornets finally created their first chance as John Eustace ghosted in behind the Rams' backline before seeing his header blocked by Dean Leacock.
But they found themselves two down in the 36th minute when, after a spell of lovely football, Green laid it off for Cywka - whose deflected effort left Scott Loach with no chance.
Watford should have replied immediately, but Marvin Sordell failed to capitalise on Dean Leacock's error, hitting the ball straight at Frank Fielding.
Malky Mackay's men came out strongly after the interval, but they were still finding a goal elusive as substitute Troy Deeney hit wide with the goal gaping.
They did pull one back in the 54th minute, though, as Stephen McGinn's excellent through-ball found Whichelow, who coolly chipped over Fielding.
But that goal only proved to spur Derby on and they soon restored their two-goal advantage as Kuqi, on as a first-half substitute for the injured Bueno, showed brilliant chest control to collect Green's pass before firing home.
The visitors desperately tried to get back into the game, but there was still time for Nigel Clough's side to grab another as Cywka jinxed his way into the box before firing an unstoppable shot past Loach.