Watford profited from Liverpool's calamitous opening at Vicarage Road to continue their remarkable rise with a fourth consecutive Premier League win.
Adam Bogdan dropped a corner with the very first touch of his league debut, allowing Nathan Ake to stab the home side ahead after just three minutes.
Odion Igahlo doubled the lead, firing in off the post from a tight angle.
And the Nigerian sealed a deserved victory with his 12th of the season, nodding in from Valon Behrami's cross.
The Hornets, promoted from the Championship last term, move to within a point of the Champions League places.
Defeat for Jurgen Klopp's Liverpool, who are now without a win in their last three league games, leaves them ninth - four points behind Quique Flores' side in seventh.