The Algerian winger played a crucial role for Pep Guardiola's side who stretched their unbeaten run to 15 league games this term at Vicarage Road.
Mahrez who was making his seventh start of the season assisted Leroy Sane for City's opener five minutes before the end of the first-half.
Following the restart of the encounter, the winger linked up with Gabriel Jesus to score his fifth Premier League goal of the season.
The effort makes Watford the only club the 2016 African Footballer of the Year has scored the highest goals against in the English top-flight.
The former Leicester City player was on parade for the entire duration as City maintain their dominance at the summit of the Premier League table with 38 points 14 matches.