A Keith Andrews goal wasn't enough for Town, as two second half goals saw Watford leave Portman Road with all three points.
Goals from Marvin Sordell and Troy Deeney ensured Blues suffered a seventh consecutive defeat, despite having the better of the chances.
The defeat means it is now 14 games without a win for Blues against the Hornets.
Paul Jewell made four changes to the side that lost to Burnley in the week, most notably with David Stockdale returning in goal and Ibrahima Sonko replacing Ivar Ingimarsson at centre-half.
Lee Martin and Jason Scotland also returned to the starting line-up, with Mark Kennedy and Jimmy Bullard making way, although the latter was named on the bench.
The game became a tight affair almost immediately, with both midfields trying to take control of the game with chances at a premium.
It was Watford though who did fashion the first chance of the game after 12 minutes, the ball was worked out wide to Michael Kightly but the on-loan Wolves winger rushed his shot and Stockdale easily saved.
Town responded two minutes later and Jason Scotland was unlucky not to get on the end of a Lee Martin cross, after taking up a good position beyond his marker Adrian Mariappa.
The visitors were playing some neat football and a good passing move saw the ball find Sordell, who cut inside Danny Collins but failed to keep his shot down and the ball flew high over Stockdale's bar after 15 minutes.
There were cries for a penalty from the Town fans just after the 20 minute mark, as Andrews was sent tumbling by Mariappa but referee Keith Stroud waved play on and the Hornets cleared their lines.
By now Town were starting to dominate proceedings and Lee Bowyer tried his luck from range, only to see his effort from 25 yards deflect just over Scott Loach's bar after 25 minutes and out for a corner.
Martin took the resulting corner and Collins rose highest in the box, only to see his header blocked on the line by Dickinson, and Sonko failed to keep his shot on the turn down and the ball went over the bar.
The recalled Martin was looking lively on the wing and his delivery in particular was causing the visitors some problems, with Chopra inches away from connecting with another of his crosses after peeling away from his marker.
Town continued to dominate but still couldn't find a breakthrough, with left-back Aaron Cresswell the latest to try his luck from range but unfortunately his free-kick deflected away from goal with Loach scrambling across his line.
However Town's dominance did finally pay off on the stroke of half-time. The ball was worked out wide to Daryl Murphy whose left-footed cross was met by the unmarked Andrews, who headed past Loach and into the corner to put Town in front.
The second half continued at the same fast tempo that the first had ended and Town almost doubled their lead four minutes after the restart. A defence-splitting pass from Carlos Edwards found Bowyer who drove the ball across the face of goal but unfortunately Scotland couldn't connect at the far post.
However Sean Dyche's side were still show their intent and were almost level 11 minutes after the break.
Mark Yeates was unlucky to see a 25 yard free-kick come back off the bar, while Sordell should have done better when spinning on the ball inside the six yard box, but the England U21 international striker failed to connect properly and Stockdale managed to save his legs and divert away the danger.
The game was becoming a real end-to-end affair and a minute later Martin went close for Town after a surging run, but the winger's low shot went just past the post with Loach well beaten.
Martin almost turned provider for Scotland on the hour mark. The former Manchester United man collected Cresswell's deep free-kick and drove the ball across the goal for Scotland, who was unable to connect and Watford were able to clear their lines.
Town thought they had extended their lead on 61 minutes, after Chopra fired home from a Murphy knockdown, however the assistant referee had raised his flag indicating the ball had gone out of play before the Celtic loanee had headed the ball.
Paul Jewell's side were really taking the game to the Hornets and Cresswell forced a fine save out of Watford 'keeper Scott Loach, who did well to beat away the left-back's free-kick with Chopra waiting to pounce on any rebound.
However despite dominating proceedings, the visitors were soon back level after Sordell scored a penalty.
Sonko was adjudged to have tripped the striker, who picked himself up to convert the spot-kick himself after 70 minutes.
The goal sprung more life into the visitors and Kightly was denied a second Hornets goal, after his long range effort was kept out by the reflexes of Stockdale after 73 minutes.
But just a minute later Watford did take the lead through substitute Deeney, who reacted quickest to a loose ball in the box that Town failed to clear and calmly slotted past Stockdale from six yards out.
Town did respond to the setback though and Scotland forced another fine save out of Loach, who kept out the striker's well hit drive after he turned away from Mariappa.
With six minutes remaining Town came close to scoring an equaliser. A Cresswell cross was met by the head of Sonko who failed to bundle the ball over the line before Murphy fired the loose ball over Loach's bar.
A minute later and Sordell could have wrapped it up for the Hornets after dancing through the Town defence, but failed to keep his head and his shot went high over the bar from 12 yards.
Town continued to press and Edwards was unlucky not to score a late equaliser, after his volley was blocked by a Watford body on the goal-line.
The defeat sees Town sit just above the bottom three on goal difference and will look to get back to winning ways against Barnsley on Saturday, kick-off 5.20pm.
Town: Stockdale, Edwards, Sonko, Collins, Cresswell, Martin, Andrews, Bowyer, Murphy, Chopra (Ellington 77), Scotland. Subs not used: Lee-Barrett, Wabara, Bullard, Carson. Booked: Andrews.
Watford: Loach, Hodson, Dickinson, Mariappa, Nosworthy, Yeates, Hogg, Buaben (Eustace 66), Kightly (Beattie 89), Iwelumo (Deeney 66), Sordell. Subs not used: Bond, Mirfin. Booked: Nosworthy, Dickinson, Deeney, Sordell.
Att: 16, 262.