It was looking good for the U's when Clive Platt swept home his sixth goal of the season after six minutes, following a corner by Mark Yeates.
And another corner was to prove Watfords downfall again in the 27th minute. George Elokobi headed on the cross into the danger zone and although Platt could not force the ball home, team-mate Matthew Connolly was able to hook the rebound into the corner of the net. It was the Arsenal loanee defender's second goal of the season.
But all the time Colchester's goal was leading a charmed life. Keeper Dean Gerken made a string of great saves and Jordan Stewart also rattled the bar from a thunderous free-kick.
The visitors were handed a lifeline when centre-half Adam Virgo slipped, enabling Marlon King to race through and drill home his tenth goal of the season.
King's thunderbolt arrived in the 40th minute, closely followed by team-mate John-Joe O'Toole, who bundled home a cross from close range to level the game at 2-2.
Watford then wrapped up the points on 64 minutes as some delightful wing play from Tommy Smith ended with Hungarian striker Tamas Priskin nodding home from eight yards out.
This was Watfords first win in five games, while Colchester have now won just once in their last nine fixtures.
Watford boss Adrian Boothroyd said: "We must stop shipping goals if we want to stay on top.
"Colchester are a good side and are difficult to beat, but it shows what players I have here that we managed to come back and win.
"People were saying that we were going to romp this division, but I never thought that because there are too many good teams in this league."
As for Colchester, they continue to flirt with possible relegation and conceding 19 goals in ten home matches has not helped their cause.