Sam Vokes rescued a point for Burnley in injury-time as Watford missed the opportunity to move into the top two.
The Clarets' Charlie Austin struck from six yards after 40 seconds, before Troy Deeney levelled with a fine strike.
But Austin then scored a penalty, his 28th goal of the season, after Marco Cassetti's foul on Alex Kacaniklic.
Fernando Forestieri levelled after a jinking run and his curled finish made it 3-2 before Vokes struck late on from close range to level the game.
Austin's early opener came when Ross Wallace's initial shot was blocked, the ball falling perfectly for the striker to tuck in the rebound.
The lead lasted only five minutes before Ikechi Anya fed Deeney, who smashed in a fine equaliser from the edge of the area.
Charlie Austin, who struck after only 40 seconds, now has 28 goals this season following his brace on Friday
Clarets goalkeeper Lee Grant then pulled off a decent save to deny Forestieri before Austin struck again, firing his penalty down the middle and into the roof of the net.
Burnley let their lead slip again within five minutes. This time centre-half Fitz Hall was the unlikely creator, playing in Forestieri, who jinked inside Jason Shackell in the area before rifling his angled shot past Grant.
Deeney then hit the crossbar with a lob in stoppage time and the sides went in to the break at 2-2.
Forestieri found a way through midway the second half when he curled in a cross from Cristian Battochio.
That looked like being enough to ensure Watford leapfrogged Hull into the automatic promotion places, until Vokes latched on to Austin's header in injury-time and slotted in the equaliser.
VIEWS FROM THE DRESSING ROOM
Watford boss Gianfranco Zola:
"I thought we'd done enough.
"We came back from behind twice and then went ahead, and towards the end I didn't see that coming, but it's not the first time that has happened.
"A sloppy piece of defending costs us a lot. I understand we have a very young team, but there's not much time for them to learn, we need to grow up quickly.
"We have done very well so far and it would be a shame not to finish what we have done.
"Now is the time we cannot give anything away, every single game is going to be very difficult."
Burnley manager Sean Dyche:
"I do take great satisfaction in the manner we performed and in the way we got a point after a ding-dong Championship clash.
"I thought the game fluctuated around mistakes to be honest. Charlie (Austin) is a player with goals in him, and I thought he could have had a couple more.
"But I'm not frustrated. Watford are a very good side. They've got every chance."
Live Text Commentary
Full Time The referee signals the end of the game.90:00 +2:21
Assist on the goal came from Charlie Austin.90:00 +2:21 Goal scored
Goal! - Sam Vokes - Watford 3 - 3 Burnley Sam Vokes grabs a goal from inside the area to the bottom left corner of the goal. Watford 3-3 Burnley.89:53 Substitution
Substitution Troy Deeney goes off and Alexandre Geijo comes on.88:45
Charlie Austin gives away a free kick for an unfair challenge on Fernando Forestieri. Nathaniel Chalobah restarts play with the free kick.87:19
Martin Paterson is penalised for a handball. Jonathan Bond restarts play with the free kick.86:50
Free kick awarded for an unfair challenge on Charlie Austin by Almen Abdi. Free kick taken by Lee Grant.86:37
The ball is crossed by Cristian Battocchio, Kevin Long makes a clearance.84:59
Foul by Brian Stock on Troy Deeney, free kick awarded. Nathaniel Chalobah takes the direct free kick.84:07
Corner taken by Kieran Trippier.83:52
Effort from outside the penalty box by Martin Paterson goes wide right of the target.83:11
The ball is sent over by Matej Vydra, save made by Lee Grant.77:20
Almen Abdi restarts play with the free kick.77:20 Substitution
Substitution (Burnley) makes a substitution, with Martin Paterson coming on for Alex Kacaniklic.77:20 Substitution
Substitution Sam Vokes joins the action as a substitute, replacing Ross Wallace.77:20
Ross Wallace challenges Nathaniel Chalobah unfairly and gives away a free kick.75:16
Ross Wallace takes a shot. Comfortable save by Jonathan Bond.71:15
Assist on the goal came from Cristian Battocchio.71:15 Goal scored
Goal! - Fernando Forestieri - Watford 3 - 2 Burnley Fernando Forestieri fires in a goal from just inside the area to the bottom right corner of the goal. Watford 3-2 Burnley.71:07
A cross is delivered by Cristian Battocchio,
The ball is sent over by Chris McCann, Nathaniel Chalobah gets a block in. Ross Wallace takes the outswinging corner, clearance by Lloyd Doyley.68:02 Substitution
Substitution Ikechi Anya leaves the field to be replaced by Matej Vydra.68:02
Ross Wallace takes a inswinging corner from the right by-line to the near post, Jason Shackell has a headed effort at goal from close in which goes wide right of the goal.65:41
The ball is swung over by Matthew Briggs, Troy Deeney takes a shot. Save made by Lee Grant.63:52
Nathaniel Chalobah produces a left-footed shot from just outside the penalty box that misses to the left of the goal.62:31
Almen Abdi takes the direct free kick.62:31 Booking
Booking Chris McCann receives a yellow card.62:25
Chris McCann challenges Matthew Briggs unfairly and gives away a free kick.61:10 Substitution
Substitution (Burnley) makes a substitution, with Brian Stock coming on for Marvin Bartley.58:28
Alex Kacaniklic takes a shot. Save by Jonathan Bond.56:28
Matthew Briggs crosses the ball, clearance by Danny Lafferty. Corner taken by Almen Abdi from the right by-line, Close range headed effort by Fitz Hall goes wide of the left-hand post.55:57
Outswinging corner taken from the right by-line by Almen Abdi, clearance made by Kevin Long.55:51
The ball is sent over by Ikechi Anya, Jason Shackell manages to make a clearance.53:58
Almen Abdi fires a strike on goal direct from the free kick.53:58 Booking
Booking Kevin Long goes into the referee's book for unsporting behaviour.53:50
Free kick awarded for a foul by Kevin Long on Fernando Forestieri.52:36
Corner taken right-footed by Almen Abdi to the near post, Kieran Trippier manages to make a clearance.52:21
Charlie Austin is flagged offside by the assistant referee. Indirect free kick taken by Fitz Hall.51:28
Free kick awarded for a foul by Charlie Austin on Jonathan Bond. Free kick taken by Jonathan Bond.51:03
The assistant referee signals for offside against Charlie Austin. Lloyd Doyley restarts play with the free kick.49:24
Inswinging corner taken by Almen Abdi from the left by-line, save made by Lee Grant.48:25 Substitution
Substitution Lloyd Doyley joins the action as a substitute, replacing Marco Cassetti.45:01
The second half kicks off.45:00 +4:06 Half time
Half Time The whistle is blown to end the first half.45:00 +2:09
Troy Deeney takes a shot.45:00 +0:36
Corner from the left by-line taken by Ross Wallace, clearance by Fitz Hall.45:00 +0:07
Free kick awarded for a foul by Cristian Battocchio on Danny Ings. Kieran Trippier takes the direct free kick.44:21
Shot by Ikechi Anya from deep inside the penalty area misses to the left of the goal.44:07
Troy Deeney takes a shot. Save by Lee Grant.42:03
Corner taken left-footed by Ross Wallace from the right by-line, Close range headed effort by Kevin Long goes wide of the left-hand post.41:42
Matthew Briggs sends in a cross, Jason Shackell makes a clearance.40:05
Alex Kacaniklic takes a shot. Jonathan Bond makes a comfortable save.35:36
Almen Abdi challenges Alex Kacaniklic unfairly and gives away a free kick. Strike on goal comes in from Ross Wallace from the free kick. The referee penalises Ikechi Anya for handball. Ross Wallace has an effort direct from the free kick.35:05
Unfair challenge on Chris McCann by Fitz Hall results in a free kick. Lee Grant takes the free kick.34:18
Direct free kick taken by Almen Abdi.34:18 Booking
Booking Danny Lafferty is shown a yellow card.34:11
Foul by Danny Lafferty on Ikechi Anya, free kick awarded.33:42
The assistant referee signals for offside against Danny Ings. Free kick taken by Marco Cassetti.32:57
Charlie Austin has an effort at goal from just outside the area which goes wide of the left-hand post.31:41
Free kick awarded for a foul by Cristian Battocchio on Marvin Bartley. Kevin Long takes the free kick.28:20 Goal scored
Goal! - Fernando Forestieri - Watford 2 - 2 Burnley A goal is scored by Fernando Forestieri from close in to the bottom left corner of the goal. Watford 2-2 Burnley.27:22
Troy Deeney fouled by Chris McCann, the ref awards a free kick. Direct free kick taken by Nathaniel Chalobah.26:50
Chris McCann produces a left-footed shot from inside the area that goes over the bar.26:41
A cross is delivered by Ross Wallace, clearance by Fitz Hall.25:01
Free kick awarded for a foul by Almen Abdi on Charlie Austin. Danny Lafferty restarts play with the free kick.23:50 Goal scored
Goal! - Charlie Austin - Watford 1 - 2 Burnley Penalty taken right-footed by Charlie Austin and scored. Watford 1-2 Burnley.22:46 Booking
Booking Matthew Briggs booked for dissent.22:29
Marco Cassetti concedes a Penalty for a foul on Alex Kacaniklic.21:34
Troy Deeney challenges Chris McCann unfairly and gives away a free kick. Free kick taken by Lee Grant.19:42
Unfair challenge on Nathaniel Chalobah by Danny Ings results in a free kick. Almen Abdi takes the direct free kick.18:21
The assistant referee signals for offside against Fitz Hall. Lee Grant takes the free kick.18:05
Free kick awarded for a foul by Danny Ings on Cristian Battocchio. Free kick taken by Nathaniel Chalobah.10:25
Charlie Austin challenges Matthew Briggs unfairly and gives away a free kick. Nathaniel Chalobah takes the free kick.9:42
Almen Abdi takes a outswinging corner.9:32
The ball is delivered by Troy Deeney, Kieran Trippier makes a clearance.8:41
The ball is sent over by Ross Wallace.8:03
Corner from the right by-line taken by Ross Wallace, Charlie Austin takes a shot. Save by Jonathan Bond.7:43
The ball is sent over by Kieran Trippier, Joel Ekstrand makes a clearance.5:49
The assist for the goal came from Ikechi Anya.5:49 Goal scored
Goal! - Troy Deeney - Watford 1 - 1 Burnley Troy Deeney scores a goal from outside the area to the bottom right corner of the goal. Watford 1-1 Burnley.5:04
The official flags Charlie Austin offside. Free kick taken by Fitz Hall.2:12
Free kick awarded for an unfair challenge on Danny Lafferty by Troy Deeney. Free kick taken by Lee Grant.0:51 Goal scored
Goal! - Charlie Austin - Watford 0 - 1 Burnley Charlie Austin grabs a goal from inside the box low into the middle of the goal. Watford 0-1 Burnley.0:35
The ball is crossed by Alex Kacaniklic.0:00
The ref blows the whistle to start the match.
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