The home side were depleted when Steven Howard was ordered off for a reckless challenge on Watford's Ross Jenkins, which will see the big striker miss the next three games, including the first leg of the play-offs should City qualify.
The Foxes found some early rhythm with Jay Spearing just failing to connect with Paul Gallagher's curling cross to the far post.
Howard and Andy King then combined to set up Martyn Waghorn who shot tamely at the keeper from 12-yards before Watford went close midway through the first-half when Danny Graham curled a shot just over from outside the area.
Chris Weale rescued Leicester on the half hour when he denied Henri Lansbury after the Arsenal loanee had found himself clean through on goal.
Leicester hit back with Howard setting up Waghorn who fired over from 14 yards and the home side took a 36th minute lead when Jay DeMerit was ruled to have tripped Richie Wellens inside the box.
Waghorn waited for the Watford protests to subside before stroking home the penalty with the keeper diving the wrong way.
Leicester raced into a two-goal lead on 42 minutes when a Howard pass spun off a defender into the path of Gallagher who cracked home a superb left-foot volley from 18-yards.
But the opening period ended on a sour note when Howard was shown a straight red for needlessly hacking down Jenkins inside the Watford penalty area.
But the Foxes went three up on 51 minutes when Adrian Mariappa made a hash of his attempted clearance to allow Jay Spearing the time and space to smash the loose ball home from ten-yards.
City found themselves four to the good on 67 minutes when Yann Kermorgant released fellow substitute James Vaughan who held off Mariappa before sliding the ball beyond the keeper from inside the area.
Watford pulled a goal back on 78 minutes when substitute Martin Taylor rose unmarked at the far post to head home a Jon Harley corner.
In time added on substitute Nicky Adams squandered a great chance to make it five for City when he dragged a shot wide from eight-yards after good work from King.