The home side got off to the perfect start in the seventh minute, and it was a moment of some satisfaction for Ellington, who had gone almost two months without a goal.
Smith won a second ball towards the right side of the Coventry area and played it inside to the Hornets' record signing, who, after one touch, took aim and fired a left-footed daisy-cutter inside Kasper Schmeichel's near post from 20 yards.
Boosted by making the breakthrough, the Hornets looked the most likely of the sides to add to the scoring in the first half, and Schmeichel did well to parry a John-Joe O'Toole thunderbolt from 20 yards before Smith fired a great opportunity wide after some neat interplay between Ellington and Lee Williamson.
In between times, the Sky Blues created their only decent opening of the first period when Robbie Simpson glanced a Stephen Hughes free-kick narrowly wide.
The consistent failure to retain possession was a feature of Watford's play throughout though, and it was from one such breakdown in play that enabled the visitors to get back on terms in the 59th minute.
Michael Doyle had time to pick out Julian Gray on the left and he sent over a fine, deep cross which Best rose well to head home the equaliser.
But with ten minutes remaining it was a Coventry lapse that gave the home side the chance to claim a vital three points - and they took it.
A long Richard Lee clearance was flicked on by Ellington, but Scott Dann misjudged the bounce of the ball and could only help it into the path of Smith, and he kept his head to lift it over the advancing Schmeichel.
Defeat was a shade harsh on Coventry, but while their opponents can realistically dream of an instant return to the top-flight, Chris Coleman's men still have very real concerns at the other end of the table.