Steve Sidwell scored his first of the season in a game in which Watford enjoyed the two best chances.
Reading had the better of the first half and Watford dominated the second period and Reading's goal came against the run of play.
But there was no denying the quality of the finish. Sidwell darted in to meet a cross from Nicky Shorey and beat Paul Mayo to the ball to head beyond keeper Richard Lee.
Yet Watford should have been ahead by then. Danny Webber, looking for his 10th strike of the season, was set up for what looked a certain goal two minutes before the interval.
Watford's new signing from West Brom, James Chambers, broke down the right, cut in and sent the ball beyond keeper Marcus Hahnemann.
Webber slid in but somehow managed to stop the ball just a yard from the line and was unable to put it into the empty net.
Then in the second half, after 75 minutes, Watford looked certain to equalise. Neal Ardley sent over the flag-kick and Neil Cox headed into the heart of the goalmouth.
Heidar Helguson climbed to nod the ball home, but Hahnemann threw himself full length to tip the ball away and it bounced across the goalmouth and beyond the post.
Watford continued to press, shots by Ashley Young, Hameur Bouazza and Gavin Mahon failed to produce the desired result.
In fact Reading could have made the points safe and spared themselves some anxious final minutes, but Nicky Forster, set up with only Lee to beat, was frustrated by another fine save by the young keeper.