The bookmakers' pre-season favourites for the drop rocked Watford with a double strike before Danny Shittu headed two goals to level before half-time.
But Barnsley were handed the winner in this thrilling encounter when keeper Richard Lee failed to hang onto Brian Howard's free-kick.
Watford protested in the last minute when referee Mike Pike denied them a penalty when Dennis Souza dragged down Marlon King in the box
Tykes skipper and talisman Howard was the man who made the breakthrough with his eighth goal of the season.
Dominik Werling's thundering free-kick was headed out and Howard's reactions were quicker than those around his as he darted onto the ball and smashed it past Lee.
Watford might have made an immediate reply but a Lee Williamson shot was well saved before Barnsley struck again in spectacular style.
Jon Macken's hard work paid off as he sent Jamal Campbell-Ryce racing down the right to fire an accurate cross that was met by Martin Devaney on the volley to double the advantage after 34 minutes.
Watford's resilience shone through as they powered back with two textbook headers from defender Shittu.
Williamson's super free-kick from the left was aimed to the far post where Shittu produced a towering header to pull one back.
And seconds before the break a cross from Tommy Smith on the right left the home side flapping and Shittu was there to head in the equaliser.
Devaney was cursing his luck after blowing the chance of his second after the break when he fired over with keeper Lee stranded.
Williamson and Smith went close for Watford, but a great save from Lee denied Macken when glanced a goalbound header from Werling's cross.
Barnsley's lead could have been restored after 63 minutes but Hungarian Istvan Fernczi wasted a golden opportunity by firing over from six yards after Campbell-Ryce crossed
Then came the bizarre own goal that Lee dropped into his own net as Wales international Lewin Nyatanga challenged to reach Howard's free-kick.
But Watford were furious when the referee waved away their strong claims for a penalty when King surged into the area but was tugged back by Souza.
And the protests continued after the game as the referee left the pitch.