Malky Mackay's side are the joint top scorers in the division and found the net three times in the space of just nine minutes at the end of the first half to sweep aside Nigel Clough's visitors.
Will Buckley, Danny Graham and Marvin Sordell were on the scoresheet as Watford moved into the play-off places.
Spaniard Alberto Bueno was handed a recall by Clough after missing the FA Cup defeat at Crawley on Monday night, and he had the first effort on goal with a shot from the edge of the box which flew wide.
Both sides were struggling to settle into their normal passing game with Watford striker Sordell crafting a rare opportunity with a good turn only to see his shot blocked by the defence.
The Rams were looking to Kris Commons for some inspiration and after a quiet first 25 minutes he showed a glimpse of quality with a burst of pace to move into space and strike a low shot which Scott Loach was glad to see sail wide.
The match was struggling to kick into life but it was one of the home side's form players who broke the deadlock in the 36th minute.
Winger Don Cowie was back from illness and was instrumental as he made space on the left to cut back a dangerous cross across the penalty area to Buckley.
The former Rochdale man has been on top of his game during the Hornets' winning streak and calmly slipped the ball through Stephen Bywater's legs.
Commons was then booked for a handball before Graham doubled the lead with a lovely 43rd-minute goal.
Buckley started the move before releasing Sordell with a cleverly lofted pass.
Sordell raced away down the right before expertly picking out Graham inside the penalty area and the striker was clinical in smashing the ball past Bywater.
The Rams were falling apart and it was 3-0 before the break.
A long ball forward should have been dealt with easily by John Brayford but the defender completely missed his kick to allow Sordell to race away and plant the ball past a bewildered Bywater.
Clough reacted with a double change at the break, replacing Commons and James Bailey with Stephen Pearson and Dean Leacock, as Paul Green moved forward from full-back into midfield.
Green immediately showed his attacking intent with a long-range shot over the top but the game was descending into a lull as the home side held on to their comfortable lead.
Miles Addison was also off target with a 25-yard effort before Bueno was on the end of a rare fluent move for the visitors but again failed to test Loach in the Watford goal.
Green had the final effort of a lacklustre second period but once more his header was off target as Watford recorded three more points.