The Hornets have now failed to beat their local rivals at home for 15 years, and the prospect of reversing that run looked even more unlikely after Matthew Spring's 30 yard blockbuster had given the visitors a 1-0 lead after 31 minutes.
Ten minutes later Spring turned provider with a through ball that caught defender Sean Dyche dallying before Steve Howard capitalised on the opportunity, driving a low angled shot beyond the Watford keeper.
After the break, Watford's passing game progressed from bad to worse, and they pumped a seemingly endless string of long balls up the field, in the hope of gaining a foothold.
As it was, they gave their supporters hope with 16 minutes left with Dominic Foley's well crafted goal. The ball was worked to the right side of the pitch and Micah Hyde's clipped cross was met with a well placed header from Foley.
After that the Hornets laid siege to the Luton penalty area, but rarely looked like creating an equaliser, which meant the Hatters held on for a deserved victory