Town's home league unbeaten run ended at 19 matches as a niggly and cynical Watford side left Portman Road with a 2-1 victory. Tommy Smith put the visitors in front on 33, then Nathan Ellington extended the Hornets' lead after the break, before Jon Walters pulled a goal back for the Blues.
Jim Magilton named the same side which defeated Sheffield Wednesday at Hillsborough last week with keeper Stephen Bywater and midfielder David Norris making their home debuts. Macedonian international Velice Sumulikoski was amongst the substitutes.
There was an early scare for the Blues when Watford striker Darius Henderson narrowly avoided making contact with a cross from the left at the far post.
Town's first shot on goal came on nine, but David Norris's effort screwed wide. However, it was the visitors who had started the stronger with several long punted balls making their approach to the game very clear.
The Blues were finding it hard to impress their passing game on the visitors and whenever they did make any headway in the Hornets' half, the result was usually a freekick for a swiftly executed foul. The Portman Road crowd quickly became fed up with referee Andy D'Urso's failure to punish these fouls with cards.
On 12 Alan Quinn sent in one such freekick to the far post where a combination of Tommy Miller and Alex Bruce sent the ball goalwards only for it to be cleared off the line and referee D'Urso to award a freekick.
The Portman Road crowd had also become frustrated with the visitors' approach to the game with chants of ‘Boring, boring Watford' ringing around the North Stand and each long ball punctuated by a shout of ‘Hoof!'.
The Hornets were regularly winning freekicks and corners, while Leigh Bromby's long throws provided a similar threat, and on 32 they went in front. Mat Sadler, reportedly a Town target during January, whipped in a corner from the right and Tommy Smith rose unmarked to head into the net.
Referee D'Urso again failed to impose his authority on the game in the 39th minute when he somehow decided not to book Darius Henderson for a foul on Dan Harding, the striker's third or fourth indiscretion of the half, despite speaking to the former Reading man at length.
Two minutes later, even D'Urso's patience wore out and John Eustace was cautioned for a cynical handball as Town broke after a Watford corner, the crowd greeting the card with ironic cheers.
Town had failed to get their own game going with Watford allowing the Blues little time on the ball. All too often the Town backline were reduced to hitting the ball long towards Jon Walters, who was coming off very much second best to Danny Shittu in the air.
The Blues' best move of the half came in injury time, but keeper Richard Lee was equal to Walters's shot from the right.
Half-time came as a relief after one of the least attractive 45 minutes of football Portman Road can have witnessed. Watford had certainly been the most dangerous of the two sides with the Blues creating very little in the Hornets' box. Town's failure to get their passing going had led to chants of ‘On the ground, on the ground...' in the closing stages.
Jim Magilton switched his side around for the second half, Alan Lee replacing Tommy Miller with Jon Walters moving to right midfield.
Watford's Nathan Ellington came close to increasing his side's lead within a minute, volleying a shot on the turn into the sidenetting. Darius Henderson was finally booked in the 50th minute for his latest foul, again to ironic cheers from the home support.
Alan Lee was within a whisker of putting the Blues back on terms in the 51st minute. The Irishman chested down a ball over the top, then lobbed the keeper but watched the ball bounce back out off the crossbar.
Four minutes later, the visitors added to their lead. Alex Bruce failed to clear a cross in from the right, the ball reaching Watford sub Jordan Stewart on the left. Henderson missed his ball across the box but Ellington was on hand at the far post to slam the ball past Bywater.
Garvan immediately lashed a 25-yard shot wide of Richard Lee's goal, before Jim Magilton made his final two changes of the afternoon. Danny Haynes replaced the ineffective Pablo Couñago and Velice Sumulikoski came on for Garvan to make his home debut.
The North Stand was again frustrated by Andy D'Urso's refereeing in the 63 minutes when Eustace went through late on Alan Quinn. It seemed an obvious booking but, with the Watford midfielder already on a yellow card, the referee left his cards in his pocket.
Bywater saved a Smith shot on 64, then made an even better stop from Ellington, turning the former Wigan man's header round the post when a goal looked certain.
In the 69 Al Bangura was yellow carded for catching David Norris with an elbow and from the resultant freekick the Blues pulled a goal back. Jason De Vos nodded the ball down and Jon Walters stabbed home.
Leigh Bromby became the latest Watford player to enter referee D'Urso's book in the 71st minute for timewasting as he prepared to hurl a long throw into the box.
Despite the card to the former Sheffield United man, referee D'Urso continued to allow the visitors to get away with wasting pretty much as much time as they liked. At one point Henderson writhed and rolled on the ground after an innocuous challenge, D'Urso initially refusing to allow the physio on to give him treatment but soon relenting.
The visitors were also allowed as long as they liked to make substitutions, on one occasion deciding to change which player they were going to replace after their initial choice for withdrawal had made his way to the touchline.
In the 80th minute the Blues came close to an equaliser. Jon Walters looped a cross in from the right, the ball sailing over keeper Lee and catching the foot of the far post.
Town were finally looking something like the side which had been on such a good run at home and in the 82nd minute Sumulikoski shot wide from the edge of the area.
The fourth official's board announcing four minutes of injury time provoked more anger and frustration on the terraces, the additional spell very poor recompense for the lengthy periods wasted throughout the second half.
Town failed to create anything significant in those minutes and the whistle signalled the end of the home league unbeaten run.
Jim Magilton immediately made his way onto the pitch and approached referee Andy D'Urso, presumably conveying to him how weak the official's performance had been. At times in the second half it appeared the Watford bench was actually running the game with the hapless official merely following their lead.
The gutless refereeing performance and Watford's somewhat cynical approach shouldn't entirely hide what was another disappointing home performance against a side coming to Portman Road with a more physical approach to the game.
As with Burnley and Scunthorpe, the Blues failed to impose their passing football on the Hornets and all too often ended up trying to play Watford at their own game, something at which Town don't excel.
Alex Bruce and Stephen Bywater were particularly wasteful with long balls out from the back which unerringly found Danny Shittu's head, while the Town midfield was never really in control of the game.
Velice Sumulikoski put in another promising display from the bench, making one superb pass and showing a willingness to put his boot in, but overall there were few positives for the Blues.
The result takes Watford to top of the table, while the Blues remain in sixth ahead of Tuesday's opponents Crystal Palace on goal difference.
Town: Bywater, Wright, Harding, De Vos, Bruce, Garvan (Sumulikoski 59), Miller (Lee 46), Norris, Quinn, Couñago (Haynes 59), Walters. Unused: Colgan, Naylor. Att: 24,227.