Boro dominated the first half but spurned some good chances then gifted Watford an opener through Matej Vydra seconds before the interval.
Vydra doubled his tally on the break in the second half as Boro chased the game, before Scott McDonald clawed back a stoppage-time consolation.
"We beat ourselves really," said Mowbray. "We were well on top in the first half and our game plan was working just as we planned but we just couldn't score the goal we needed and then found ourselves behind.
"We dominated the first 45 minutes in terms of possession and maybe 90% of the game was played in their half - and we had some really good chances but didn't make them count.
"But then they scored and that changed the game completely. We had to throw caution to the wind and commit men forward and empty the midfield and against Watford that is always a risk.
"They are the best team in this division in that situation and as we pushed forward they punished us. We learned a lesson today."
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