Gary McSheffrey's first-half strike and a Lukas Jutkiewicz effort after the break wrapped up the points for the Sky Blues to ease their relegation worries.
A new board of directors was recently installed at the club, but the threat of administration still hangs over them and this win has helped halt a slide towards the bottom four.
The hosts were boosted by the return of Marlon King from suspension, and the seven-goal top scorer forced an excellent save from Scott Loach with a superb long-range effort in the second minute.
Watford, still harbouring hopes of securing a play-off berth, struggled to find their stride in the early stages.
Andreas Weimann's powerful volley which whistled just past the post was the closest they came in a disjointed first-half display.
The home crowd rose to their feet in expectation as David Bell fired in a rasping 20-yard drive midway through the half, but it flew narrowly wide.
The breakthrough finally came as Coventry deservedly seized the advantage in the 27th minute.
Bell provided the assist for McSheffrey, who arrowed home an effort from the edge of the box.
Hornets boss Malky Mackay made a double change at the break as he sought to revitalise his flagging side. Matthew Whichelow and Ross Jenkins made way for Will Buckley and Daniel Drinkwater.
But it was Coventry who started the half on the front foot and Aron Gunnarsson came close to doubling their lead when he headed McSheffrey's right-wing corner onto the bar.
Drinkwater spurned a good opportunity to apply some pressure for the visitors when he smashed a 20-yard free-kick straight into the wall.
The prolific Danny Graham was beginning to find opportunities to add to his 26-goal haul for the season, but he wasted a chance when he scuffed a shot from close range following good work from Buckley.
And Watford were made to pay soon after when substitute Jutkiewicz, on for the ineffective Freddy Eastwood, turned home Gunnarsson's cross with his first touch.
Watford looked to respond immediately but Keiren Westwood made a superb save to deny Weimann when the Austrian attempted to curl the ball in from 12 yards.
And Westwood again came to the rescue when he plucked Adam Thompson's dangerous cross out of the air with a host of Watford players waiting to pounce.
Coventry's attempts to run down the clock saw Richard Keogh booked for time wasting as they closed in on a crucial three points.
And there was relief and delight in equal measure all around the ground when the whistle finally did go as Coventry moved 10 points clear of the relegation zone.
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