Carlos Edwards' 49th minute goal gave Luton hope after a dreadful first half from the home side that saw Darius Henderson and Malky Mackay give the visitors a comfortable lead.
And despite the Hornets having Ashley Young sent off in the 67th minute the hosts were unable to stop 2006 starting in miserable fashion.
Amid deafening noise inside a packed-out Kenilworth Road it was the visitors who got off to a flying start as Leon Barnett, in for the injured Chris Coyne, did well to head clear a Henderson cross-shot after just 40 seconds.
Young then immediately whipped in a centre from the opposite flank, which Markus Heikkinen this time cleared.
Steve Howard did have a speculative 25-yard effort that drifted harmlessly wide in the third minute, but it was the Hornets who took the lead six minutes later as their policy of hitting long balls forward at every opportunity paid early dividends.
Marlon King was able to nod down a pass into the area and Henderson lost Heikkinen to bury a left-footed shot past Marlon Beresford from 15 yards for his seventh goal in only 12 starts.
The Hatters rallied as Ahmet Brkovic and Rowan Vine both saw efforts blocked from Edwards' 13th minute cross, but it was Watford who controlled the opening exchanges as they bossed the midfield area.
Front pair Henderson and King were causing the Luton defence all sorts of problems and the pair combined again in the 25th minute when, after a long throw had caused havoc in the area, Henderson flicked on for King to send a 12-yard shot into Beresford's midriff.
With Luton struggling to string two passes together it was no surprise when Watford made it two on the half-hour, although when the goal came it was surrounded by controversy.
Beresford dived to save Mackay's close-range effort after Anthony McNamee's inswinging free-kick from the right, but referee's assistant Simon Beck signalled the ball had crossed the line and the goal was given.
Luton's miserable first-half showing was summed up when Steve Robinson completely miskicked a corner out of play in stoppage time and the Hatters were booed off the field as they trudged down the tunnel.
Town needed something special to lift them in the second period and that came just four minutes in as Edwards brought Town right back into it.
Visiting full-back James Chambers dallied on the ball after Howard's cross from the left and Robinson was able to prod the ball into the path of Edwards, who fired home into the far corner from 20 yards for his second of the season.
With the home fans back in full voice, Town roared on and from Robinson's 53rd minute cross from the right, Howard saw a header superbly tipped around the post by Ben Foster.
The game then quietened down until the Hatters were handed another lifeline in the 67th minute as Young was sent off.
Kevin Foley fouled the winger with a push in the back when contesting a header, but as Young fell to the ground he kicked out at Town's full-back and was shown a red card. Foley himself was booked for his part in the incident.
Despite the numerical advantage, Luton couldn't force another attempt on goal as Watford held on for three valuable points.