Carlos Tevez and Edin Dzeko will start up front for Roberto Mancini's men after the Italian striker's training ground bust-up with his manager on Thursday
The former Inter manager has also opted to rest Joe Hart and give Romania international Costel Pantilimon a chance in goal.
Sergio Aguero is out of the squad with a hamstring injury following City's 3-0 victory against Stoke on New Year's Day and midfielder Yaya Toure is rested for the game.
Hornets boss Gianfranco Zola has opted for a forward pairing of Troy Deeney and Udinese loanee Matej Vydra to take on City's strong centre-back pairing of Vincent Kompany and the returning Joleon Lescott.
Manchester City starting XI: Pantilimon; Zabaleta, Kompany, Lescott, Clichy; Garcia, Barry, Milner; Silva, Tevez, Dzeko.
Subs: Hart, Rekik, Nastasic, Sinclair, Lopes, Suarez, Balotelli.
Watford starting XI: Bond; Doyley, Ekstrand, Nosworthy; Cassetti, Chalobah, Eustace, Pudil; Forestieri, Deeney, Vydra.
Subs: Bonham, Neuton, Anya, Battocchio, Yeates, Bia, Geijo.