After a goalless draw at Crystal Palace on Sunday ended their 18-match winning run, City, who lead second-placed Manchester United by 15 points, took 38 seconds to get in front when an unmarked Raheem Sterling turned in a low cross from Leroy Sane at the back post.
Belgian Kevin De Bruyne had a free kick tipped on to the bar and it was his low cross in the 13th minute which was turned into his own net by Watford defender Christian Kabasele to make it 2-0.
Andre Gray tested Ederson after a rare break from the visitors but City wrapped up victory in the 63rd minute when Watford goalkeeper Heurelho Gomes fumbled a low De Bruyne cross and Sergio Aguero pounced to slot home the loose ball.
Gray got a consolation for Watford in the 82nd minute, slotting home a low cross from Andre Carillo.
Meanwhile, James McArthur and Luka Milivojevic struck to help Crystal Palace come from behind and continue their revival under Roy Hodgson as they beat Southampton 2-1.
Saints took the lead at a rainswept St Mary’s when Shane Long struck his first goal since February 2017 in the 17th minute, ending his drought by smashing home Jeremy Pied’s low cross from inside the area.
Alex McCarthy made a superb low save to deny Christian Benteke as Palace pushed for an equaliser after the break, and they finally found one in the 69th minute when McArthur drove home from close range after Benteke’s flick-on.
Then Milivojevic curled home a sumptuous winner from 20 metres from Andros Townsend’s cut-back with 10 minutes remaining to help Palace leapfrog their opponents and move into 14th, while Southampton drop to 17th, above the
relegation zone only on goal difference, and departing to boos from their fans.
In another match, two goals from Andy Carroll gave West Ham a 2-1 win over West Bromwich Albion, lifting the London side out of the relegation zone and leaving their opponents without a win in 20 top-flight matches.
James McClean opened the scoring for the visitors in the 30th minute with his first goal for West Brom in 16 months, ending a solo weaving run with a shot from just outside the area.
Carroll made it 1-1 on the hour mark, using his height to leap above two defenders and head a cross past keeper Ben Foster, breaking his own 14-game goal drought - the striker’s longest dry spell in almost a decade.
After an action-packed final half-hour, Carroll sealed the win in the fourth minute of stoppage time, blasting in a shot from a tight angle from a cross by Marko Arnautovic.
Elsewhere, Tottenham striker Fernando Llorente returned to haunt Swansea and Dele Alli added a late second as Mauricio Pochettino’s side won 2-0 rise to fifth.