They finished with ten men after having midfield man Lee Williamson sent off for a two-footed tackle in the 75th minute.
The visitors made their customary forceful start with Tommy Smith going close with a shot from the edge of the box after just two minutes.
They took the lead in the tenth minute when winger Adam Johnson popped up on the edge of the six-yard box to head home a right-wing cross from Lloyd Doyley.
Watford almost increased their lead when Williamson had a close-range shot blocked away.
But Scunthorpe weathered the storm and were back on level terms in the 20th minute when striker Jonathan Forte squeezed a shot beyond goalkeeper Richard Lee at the near post for his first goal for the club.
Forte had the ball in the net again after 32 minute only to be flagged offside.
Watford finished the first half strongly but Smith shot weakly after breaking free into the box, while striker Marlon King fired well wide from 20 yards.
Scunthorpe went close early in the second period when Forte glanced a header just wide of the far post.
But it was Watford who regained the lead in the 61st minute when striker Darius Henderson applied the finishing touch after a shot from Smith had been blocked out by goalkeeper Joe Murphy.
Three minutes later, King forced his way past central defender Andy Butler to make it 3-1 to the visitors.
Scunthorpe went close at the death when leading marksman Martin Paterson crashed a shot against a post from the edge of the box.
But it was too little, too late for Scunthorpe, who slipped to a second successive home defeat.