The Blades were reduced to ten men in the first half when Phil Jagielka was red carded and with three minutes to go Watford's Micah Hyde was ordered off for his second bookable offence.
United carved out the openings early on ,winger Jon-Paul McGovern finding space on the right flank and picking out Wayne Allison, whose fierce right-foot shot was cut out in spectacular fashion by Alec Chamberlain.
Full-back Rob Kozluk tried a shot from long range before the Sheffield side swept ahead in the 10th minute.
Transfer-listed Peter Ndlovu provided an inch-perfect cross and Allison stuck out a foot, his shot crashing in off the post.
Keeper Paddy Kenny foiled the London side, sliding in to block a Heidar Helguson after neat work by Neal Ardley.
Watford pulled level in the 35th minute, after the lively Helguson was pushed from behind by Jagielka. The United centre-back was immediately red-carded by referee Foy and skipper Neil Cox hammered in the spot-kick.
United were in trouble again two minutes later, Paul Robinson crossing from the left and Helguson nipped in to cleverly flick the ball beyond Kenny's reach from six yards.
Allison squandered a chance, pulling the ball wide at the far post as United brought on ex-Watford centre-back Robert Page to shore up the defence at the expense of McGoverrn. Helguson almost grabbed a second on the stroke of half time as Kenny produced another vital stop.
Ndlovu pulled a good chance wide from 12 yards and Allison headed a Michael Brown free-kick wide at the far post as United brought on new signing, Sheffield-born striker Michael Boulding for his Bramall Lane debut.
He should have snatched the equaliser on 61 minutes after Michael Tonge's long-range strike was pushed away by Chamberlain. Boulding steamed in but hooked the ball high and wide from 15 yards out