The Hornets were the better side in a mediocre first half as Tommy Smith and Heidar Helguson tormented City's back four but could not make a breakthrough.
The visitors created the first real chance after five minutes when a deflected cross fell to Jamie Hand and despite heavy pressure from Craig Tead the winger hit a low shot that forced a great save from Morten Hyldgaard.
Helguson also went close when his half volley from 18 yards had the keeper back pedalling but his dipping effort flew narrowly over.
Coventry's best chance to take the lead fell to Gary McSheffrey after Gary McAllister released Richie Partridge down the left.
Alec Chamberlain parried Partridge's effort and it fell to McSheffrey who hooked his shot well over the bar.
The game then turned on its head in a ridiculous incident after the break that saw Youssef Chippo receive his marching orders.
The Moroccan international picked up his second yellow card after jumping in front of Allan Nielsen as he took a throw-in, despite clearly being told not to by referee Trevor Parkes.
Within two minutes Watford had the lead as a rattled Sky Blues played themselves into trouble.
Barry Quinn tried to shepherd the ball out for a goal kick under pressure from Jamie Smith, but the winger robbed the fullback and forced two good saves from Hyldgaard.
The loose ball fell to Helguson who laid it into the path of Micah Hyde, who finished emphatically from the edge of the box.
The sense of injustice helped City to raise their game but, despite switching to a brave three-up-front formation, they could not trouble a comfortable Watford defence.