Scott McDonald scored the only goal of the game to ensure Middlesbrough stayed within touching distance of the Championship's automatic promotion places.
Watford, who matched their hosts for most of the game, will feel aggrieved at the manner of their defeat.
Former Celtic striker McDonald looked offside for the winning goal, scored just five minutes before the break.
Victory keeps Middlesbrough in third place behind Southampton and West Ham.
Watford, who came into the game on the back of successive league wins for the first time this season, could have conceded three in the opening six minutes.
Barry Robson dragged a shot wide, then McDonald's first-time volley was hit into the ground for a comfortable Loach save before top scorer Marvin Emnes mis-hit a shot wide from close range in the seventh minute.
A faulty fire alarm saw an evacuation begin at the Riverside, only for those who had left to be called back, having missed none of an increasingly scrappy affair.
But a goal duly arrived five minutes before half-time, in controversial circumstances.
Merouane Zemmama battled brilliantly to win the ball from Lee Hodson and drove forward to pick out Robson, the former Celtic man showing quick feet to release McDonald, who was clearly offside.
Unperturbed, the Australian's first shot was well stopped by Loach but made no mistake to slot home from the follow-up.
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