Goals in each half from Leroy Sane and Riyad Mahrez secured all three points for the champions, who were again without the injured Sergio Aguero and left the in-form Raheem Sterling on the bench at Vicarage Road.
Abdoulaye Doucoure had them worried in the closing stages after Fabian Delph lost possession near his own penalty area, but City soaked up the late pressure to hold onto the lead.
The result puts City five points ahead of second-place Liverpool, having played a game more, and means Watford have now lost seven matches in a row against Pep Guardiola's side.
Ben Foster did superbly to deny Mahrez and stop Bernardo Silva and David Silva from following up on the rebound, but Troy Deeney spurned Watford's best opening of the first half when he failed to beat Ederson's outstretched leg from eight yards out.
Sane punished that miss five minutes before the break, turning home Mahrez's curling cross from the right with his chest after Foster had thwarted David Silva moments before.
It was a goal that seemed to sap some life out of the home fans and any hope of a comeback was seemingly quashed six minutes after the break, when Mahrez swept home Gabriel Jesus' cross when unmarked in the box.
Jesus wasted two clear chances for a third, heading Bernardo Silva's flick-on over the crossbar before clipping a tame finish wide of the right-hand post, but they were not left to rue those misses despite Doucoure scrambling the ball home with six minutes left.
What does it mean? City put pressure back on Liverpool
City were left to endure a nervy climax to a match that for so long had been comfortable, and it means they again have a healthy advantage over Liverpool in the table ahead of the Reds' game with Burnley on Wednesday.
Guardiola will be pleased to have been able to rest the likes of Sterling and Aymeric Laporte, too, with captain Vincent Kompany getting only his fourth Premier League start of the season.
Mahrez a real menace
Mahrez was causing problems with his right-wing delivery long before he set up Sane to open the scoring, and he fully deserved to be on the scoresheet for a lively display, even if he was sometimes guilty of over-playing. A good Foster save denied him a second goal.
Success is hard to come by
The game largely seemed to pass by Isaac Success, who appeared uncertain when to drop deep to bolster the midfield and when to support Deeney. Mostly, he failed to do either. He also completed just 50 per cent of his passes.
Key Opta Facts
- Manchester City's goal difference of plus 38 is the is the best recorded by an English top-flight team after the first 15 games of a season since Sunderland in 1892-93 (plus 39).
- City have scored at least twice in their last nine games against Watford in all competitions, winning all nine by an aggregate score of 29-5.
- Watford have lost three in a row in the Premier League for the first time since December 2017 under Marco Silva (4 games).
- City have now gone unbeaten in each of their last 21 games in the Premier League (W18 D3), since a 2-3 defeat against Manchester United in April.
- Leroy Sane has scored five goals in his last five Premier League starts.