Watford 3-0 Liverpool: Odion Ighalo scores twice in comfortable win
Nathan Ake made the most of an Adam Bogdan howler to open the scoring just three minutes in, before Ighalo doubled Watford's lead after just 15 minutes.
The Nigerian striker then scored Watford's third after nodding in Valon Behrami's superb cross, leaving the Hornets just one point off the Champions League places.
Liverpool, meanwhile, are without a win in December and remain five points off the top four - with their goal difference now dropping to -2.
With just three minutes on the clock, a swinging corner fell into the hands of Bogdan, who was deputising for the injured Simon Mignolet, but he dropped the ball into the path of Ake - on loan from Chelsea - who prodded home his first Premier League goal.
However, replays showed that Bogdan may have had both hands on the ball at the time of Ake's strike.
Watford then made it 2-0 when Troy Deeney played an excellent ball through to Ighalo, who muscled off Martin Skrtel and fired the ball into the bottom-right corner of Bogdan's goal - his 27th league goal of 2015.
Liverpool's problems worsened when Skrtel was forced off with an injury, as Jurgen Klopp opted to bring on Divock Origi as his replacement in an attack-minded substitution.
Moments after the break, Origi's deft touch set up Adam Lallana in the area, but his goal-bound effort was superbly blocked by Craig Cathcart - denying a certain goal.
A slip from Mamadou Sakho then gave Ighalo a one-on-one opportunity with Bogdan, but the Nigerian striker's effort was well saved by the Hungarian goalkeeper - who tipped a close-range shot over the bar.
Liverpool almost reduced the arrears moments after Ighalo's miss through Jordan Henderson, but the 25-year-old's strike was tipped over by an acrobatic Heurelho Gomes - who recorded a second successive clean sheet.
A toothless Liverpool were punished for their wastefulness when Deeney fed the ball through to substitute Behrami, who composed himself and delivered a super ball onto the head of the in-form Ighalo for his 12th goal of the season, completing an excellent win for the hosts.
It's four top-flight wins in a row for Watford for the first time since April 1987, and that result keeps them in seventh - but just one point behind Tottenham Hostpur and Manchester United, who are in fourth and fifth respectively.