Leroy Sane and Riyad Mahrez had Pep Guardiola's side two goals up by early in the second half and, though they had to hang on a bit after Abdoulaye Doucoure poked home in the 85th minute to cut the lead in half, City ran to a seventh win on the trot.
The loss condemned Watford to a third straight Premier League loss for the first time in over a year, but City are now unbeaten through 15 league matches this season, with 13 victories and just two draws.
And Guardiola's free-flowing side are doing it in style, having now netted 45 times this term while conceding just seven.
The plus 38 goal difference is not quite a record in the English top flight but is the best of any team in the last 125 years.
You have to look all the way back to the 1800s to find the last team with a better goal difference, with the 1892-93 Sunderland team having rolled up a plus 39 goal difference through 15 matches.
City have found goals from all over the park this season, but Sane and Mahrez scoring against Watford should not have come as much of a surprise.
Sane was handed a starting role on Tuesday and once again made it pay off for his manager. The German has now netted five times in his last five starts in the league.
For Mahrez, scoring against Watford is something of a habit, with the former Leicester City star having netted six times against them. No other Premier League opponent has allowed the Algerian to find the net as many times.
City have now scored at least twice in their last nine meetings against Watford in all competitions, winning all nine clashes and rolling up an aggregate score of 29-5 in those matches.