The Vicarage Road revolution has centred around a handful of loan signings from Serie A side Udinese, who are also owned by the Hornets' owners the Pozzo family, and two of those borrowed players were on target inside the opening 20 minutes.
Almen Abdi stroked home the opening goal from the penalty spot in the fourth minute after Matej Vydra had been shoved in the goalmouth by Blues skipper Steven Caldwell.
Vydra added the second himself by springing the offside trap before coolly slotting past Jack Butland.
Blues took too long to get going and rarely threatened Manuel Almunia's goal.
The defeat means new boss Lee Clark is without a league win since he replaced Chris Hughton at the helm.
The hosts made the perfect start when their first attack culminated in a penalty.
Highly-rated stopper Butland made a smart save to turn away Daniel Pudil's effort but, as the ball looped into the air, Vydra was clearly shoved by Caldwell under the crossbar.
Referee Keith Stroud took his time to award the penalty, with Caldwell subsequently fortunate not to be dismissed, and Abdi squeezed the spot-kick past Butland's dive into the left corner.
The hosts poured on the pressure as ex-Blues defender Martin Taylor beat Curtis Davies in the air only to nod straight at Butland from inside the six-yard box before Abdi lashed wide.
It was all one-way traffic and came as no surprise when Vydra added a second after 17 minutes.
The Czech Under-21 international darted along the line and beat the offside trap to latch onto Mark Yeates' fine through ball. He then showed composure which belied his age; waiting for Butland to make his move before lifting the ball into the net.
The busy Vydra showed he can provide a threat in the air too, as he arched his back to nod just wide from Lloyd Doyley's centre.
Blues' defence kept playing with fire by persisting with a high back-line, and they were indebted to Butland when he came out to avert the danger with Chris Iwelumo bearing down.
The hosts continued to threaten in the second half with Abdi directing a header just wide.
At the other end Nikola Zigic, who had been promoted to the starting line-up by Clark, could only fire straight at Almunia.
Clark made a double change, introducing Peter Lovenkrands and Morgaro Gomis - a move which galvanised his troops - but their best chance fell to midfielder Hayden Mullins and he dallied long enough to allow Watford to clear.
The Blues were finally growing into the game and Chris Burke went close with an effort which went over the bar.
Ex-Watford striker Marlon King then headed a free-kick just wide and Clark threw on Ravel Morrison, but the Hornets held on to make it two wins from their first three league encounters whilst Blues have yet to record a win from their first three.
Source: DSG