Stranded at the foot of the Championship, Charlton needed to win most of their remaining 11 matches to stand any hope of survival, but in a topsy turvy game they came from behind to lead at the break only to allow the visitors to score twice in the second half for the three points.
Watford themselves have been struggling most of the season but this their fifth win in seven matches to help them climb away from relegation.
Charlton fell behind after 16 minutes in virtually Watford's first attack when Tommy Smith set up Don Cowie to score easily.
But within four minutes, Charlton were level when Deon Burton put Tresor Kandol through and the big striker used his strength to go past the defender and round the goalkeeper to become the first striker since the middle of December to score for the home side.
Kandol, on loan from Leeds United, has missed the last two Charlton matches because of a family problem but he scored his second goal to put the home side in front with a powerful header.
It took a fine save from Charlton goalkeeper Rob Elliot to deny Watford substitute Grzegorz Rasiak just before half-time, but Rasiak was on hand in 56 minutes to score an excellent equaliser for the visitors after turning and firing home from 20 yards.
Charlton's confidence began to wane and they introduced Chinese International Zhi Zheng for his first game in six months following a foot operation.
But he was unable to inspire his side and Watford snatched the three points seven minutes from time after a mix-up between goalkeeper Elliot and defender Mark Hudson presented Tamas Priskin with the chance to score a simple goal and virtually doom Charlton, who have won just twice in 25 matches.