Bradford's free-for-all experiment paid dividends as Bryan Robson's battlers secured a second crucial win in the space of four days.
The next-to-bottom outfit put aside their financial worries to pull in a crowd of over 17,000 and a determined first-half display boosted their first division survival hopes.
Welsh midfielder Paul Evans was City's driving force and he set them on their way with a fierce free kick after just nine minutes - his first goal since October.
Watford's centre-half Sean Dyche was penalised for hand-ball just outside the visitors box and Evans made no mistake with a low strike from 20 yards.
Five minutes later, the Bantams had a strong penalty appeal waved away when Watford midfielder Bruce Dyer looked to have handled and City striker Dean Windass saw his superb 25 yard volley dip agonisingly wide of the far post.
Watford lost the experienced Neil Cox in the warm-up and they struggled to halt Bradford's enterprising attacks.
After 22 minutes, a well worked training ground move brought City a deserved second when Windass timed his run to the near post perfectly and lashed home Evans' low corner from 10 yards.
Roared on by the massive crowd City continued to press and Watford's teenage keeper Lenny Pidgeley did well to stop Jason Gavin's close range header from another Evans corner.
City substitute Ben Muirhead could have wrapped up the game with 20 minutes remaining when Evans' through ball sent him clear.
Muirhead got ahead of his marker but his shot from 16 yards flew wide of the target.
Watford almost found a way back when skipper Neal Ardley's free kick rebounded off the crossbar and substitute Scott Fitzgerald could only head the follow-up over the bar.
City dug in for the remainder to claim their first clean sheet for two months and narrow the gap on the sides hovering above the relegation places.