Will Hughes, Troy Deeney and Kiko Femenia struck as the Cottagers crumbled in the second half and were left 16 points adrift of safety with just five games remaining.
Fulham invested close to £100million in their squad after achieving promotion from the Championship via the play-offs last season, but their immediate return to the second tier was sealed after a ninth successive loss.
Ryan Babel cancelled out Abdoulaye Doucoure's first-half opener but a tactical shift at half-time from Javi Gracia made the difference, with Watford running away to a comfortable triumph ahead of their FA Cup semi-final against Wolves on Sunday.
Fulham started the game positively but fell behind in the 23rd minute when Maxime Le Marchand invited Doucoure to shoot and the midfielder duly fired beyond Sergio Rico from 18 yards.
Cyrus Christie saw a cross tipped against the bar before Babel showed tremendous composure to round Ben Foster in the 33rd minute.
Joe Bryan's cross hit Hughes' arm in the box before half-time but nothing was given and in a bid to halt Fulham's momentum Gracia switched to a three-man defence for the second period.
Ryan Sessegnon wasted a great opening and Fulham where punished when Le Marchand's attempt to clear a corner was emphatically volleyed past Rico by Hughes in the 63rd minute.
Fulham's resistance was broken and Andre Gray, who replaced Gerard Deulofeu at the break, did superbly to tee up Deeney six minutes later.
Femenia delivered the final blow 15 minutes from time when he guided home another pass from Gray at the end of a swift counter-attack that caught Fulham short.
What does it mean? Parker losing time to prove credentials
Fulham sacked Slavisa Jokanovic in November and removed his replacement Claudio Ranieri in February. Scott Parker was placed in charge until the end of the season, but he has now lost all five of his matches at the helm.
With an overhaul of the squad likely needed before a tough campaign in the Championship, Parker will have to hope his talk of wanting to restore the club's identity and playing style proves sufficient for him to be backed.
Gracia's tactical shuffle pays off
Christie had been a hugely positive outlet for Fulham in the first half but Gracia's switch to 3-5-2 for the second half kept him in check. The Cottagers were unable to pose the same sort of threat and Watford were on top from then on.
After sitting out the 2-0 loss to Manchester City on Saturday with an injury sustained on international duty, Aleksandar Mitrovic's return appeared a boost to Fulham's forward line. However, the Serbian striker only got three of his nine efforts on target and his link-up play was largely poor.
Key Opta facts
- Watford have earned 46 points this season, their best ever return in a Premier League season and the most points they have accrued in a top-flight campaign since 1986-87 (63).
- Fulham have lost each of their last nine league games, the second longest such run in their history, surpassed only by 11 straight defeats in 1961-62.
- This season's relegation of Huddersfield Town and Fulham makes April 2 the earliest date by which two clubs have been relegated in a single Premier League campaign.
- Fulham are now winless in their last 19 away games in the Premier League (D2 L17) since beating Aston Villa in April 2014; this is the longest run in the division since Hull City went 26 away games without victory between March 2009 and August 2013.
Watford face Wolves at Wembley on Sunday, aiming to reach their first FA Cup final since 1984. Fulham will be playing solely for pride when they host Everton in 11 days' time.