The sixth-placed Hornets were the country's form team going into the clash having registered seven successive victories in all competitions.
But they could not match the clinical first-half finishing of a Bluebirds side boasting a fit-again Jay Bothroyd, the recalled Craig Bellamy, Michael Chopra, Peter Whittingham, Seyi Olofinjana, and debutant Jay Emmanuel-Thomas.
Bellamy, Chopra and Bothroyd handed confident Cardiff a commanding advantage with just half-an-hour gone but Watford made a real fight of things and Will Buckley, who had earlier missed a golden early chance, pulled one back before 15-goal Danny Graham also wasted a gilt-edged opening.
The dominant Hornets were buzzing at the start of the second half as Marvin Sordell's 10th of the season made it 3-2, but they were left to wonder what might have been as Buckley saw a goal disallowed and also cannoned an effort off a post.
Substitute defender Gabor Gyepes then made the points safe in the 83rd minute as Cardiff climbed into second place.
The clash came too soon for another of Cardiff's big names in Aaron Ramsey - with the Arsenal midfielder putting the finishing touches to his month-long loan agreement - and defender Dekel Keinan who is awaiting a work permit following his arrival from Blackpool.
Watford handed a debut to on-loan Tottenham winger Andros Townsend - just one change from the side who beat Derby 3-0.
Buckley broke the deadlock against the Rams last weekend and he should of done so again here, capitalising on a defensive mistake from left-back Lee Naylor but firing over when clean through.
And the visitors were made to pay in the 14th minute as Bellamy collected a great crossfield pass from Whittingham before firing past Scott Loach at the second attempt after the Hornets stopper had done well to block his initial effort.
Three minutes later and it was 2-0.
Bothroyd, making his first outing since December 4 after a hamstring injury, marauded forward before picking the perfect opportunity to feed Chopra who slid the ball coolly past Loach.
It looked to be game over just past the half-hour mark as Bothroyd got in on the act with a superb third from the edge of the area.
But Buckley quickly responded from close range to atone for his earlier miss, before Graham wasted another great chance from six yards.
Yet the visitors did not have to wait long for a second after the restart as Sordell dinked a quality chip over Tom Heaton, who appeared to slip in the process, in the 48th minute.
Dominant Watford looked to have levelled matters shortly before the hour mark but Buckley's flick was disallowed for offside.
Buckley was at the centre of everything and he rifled against a post minutes later.
The severe threat of an equaliser seemed to spark Cardiff into the action and, despite the loss of Bothroyd to what looked like cramp, the hosts repelled Watford's advances and wrapped things up thanks to Gyepes' close-range effort.