The Hornets will feel they made hard work of the win, after leading 4-1 with seven minutes remaining, but manager Brendan Rodgers will at least be pleased that his side rediscovered their scoring boots after failing to find the net in three of their last four games.
Watford had the tie firmly in their grasp with two goals in the space of ten first-half minutes.
First, a Jobi McAnuff corner was half-cleared by Jose Fonte, but only as far as Jay DeMerit around 12 yards out and the Hornets skipper chested the ball before thumping a rising right-footed half-volley high to Julian Speroni's right.
That gave Rodgers' men an early confidence which manifested itself in a superbly-worked second goal on 27 minutes.
Ironically, it stemmed from a Crystal Palace corner, but once John Oster's set-piece was over-hit and Grzegorz Rasiak had got good distance on a clearing header, Watford broke at pace and with real purpose.
Will Hoskins and Rasiak, again, were involved in getting the ball to McAnuff and the former Eagles wide man swung a superb cross to the back post where Chelsea loanee Jack Cork arrived unmarked to head in his first Hornets goal.
However, Palace were back in the tie within three minutes of the restart when Oster's free-kick was headed back into the danger zone by Alan Lee and Clint Hill nodded in to cut the deficit to 2-1.
But it looked to be game over when Watford scored twice in the space of three minutes midway through the second half.
Hoskins got his name on the scoresheet when he swivelled to rifle past Speroni after Rasiak had headed a McAnuff corner back into the six-yard box.
McAnuff, who was having his best game for Watford in some time, then played a key part in the fourth goal as well, embarking on a run from box to box before finding Rasiak, who curled a fine shot with the outside of his left foot from the edge of the area past Speroni.
Palace though, refused to lie down and seven minutes from time Neil Danns give his side a glimmer of hope when he finished well following Oster's cross into the box.
However, to put Watford under real pressure, the Eagles needed to score again quickly, so the fact Paul Ifill netted in the sixth minute of injury time following a long ball rendered the final goal of the game no more than academic.