The Hornets had gone in front when Shaun Cummings failed to deal with Troy Deeney's cross and turned it into his own net.
But the visiting side levelled before the break when Jimmy Kebe headed in from close range.
Neither side looked likely to get a winner before Le Fondre netted a typical predator's finish from Ian Harte's corner.
It was Watford's first home defeat in the league since October while the victory lifted Reading back into the top five.
The Royals began the game with a clear tactic to deliver deep crosses into Watford's penalty area and it very nearly paid off in just the ninth minute.
Noel Hunt was leaning back when he connected with Cummings' cross but he still managed to direct his header inches wide of the far post.
Another back post delivery from Cummings was met by Kebe but the presence of Lee Hodson deterred the winger from making a clean contact.
Kebe's movement was causing problems but he failed to get enough purchase on another chance, leaving goalkeeper Scott Loach with a simple save.
The home side's dangerous man Marvin Sordell was kept quiet until his defence-splitting pass led to the opening goal in the 29th minute.
The England Under-21 international pivoted on the halfway line before releasing an inch perfect pass to Deeney and his whipped cross was turned into his own net by Cummings.
Brian McDermott's side drew level three minutes before the break when another deep cross was converted by Kebe.
The Royals hit the hosts on the break and Hal Robson-Kanu picked out the unmarked Kebe at the back post for the winger to cushion his header back across goal and into the net.
In the second half, an error from Nyron Nosworthy - making his first appearance since signing a permanent deal - nearly allowed Simon Church to put the hosts ahead but John Eustace got back to slide the ball away.
At the other end, Deeney snatched at a half-volley as the ball went sailing over the crossbar before a dipping free-kick from Craig Forsyth landed on the roof of goalkeeper Adam Federici's net.
The visitors thought they should have had a penalty when Hunt tumbled under the presence of Lee Hodson but referee Graham Salisbury rightly waved away their protests.
Deeney lashed another effort high and wide as the game appeared to be heading for a draw before Le Fondre replaced Church with eight minutes to go.
And the former Rotherham man provided a telling impact just moments later.
Harte's corner was flicked on to Le Fondre at the back post and he swivelled to lash in the winner.