Diego Fabbrini scored a late goal to rescue a draw for Watford at Reading.
The home side took the lead through Adam Le Fondre's powerful left-footed strike and Jem Karacan bundled in from a set-piece to add a second.
Watford's Marco Faraoni scored a header but Karacan slotted in a Le Fondre knock down to restore a two-goal lead.
Watford striker Troy Deeney has scored five goals in three appearances this season
Troy Deeney converted a penalty for the visitors after Danny Guthrie's foul on substitute Fabbrini, who prodded home in the 89th minute.
The result ended Watford's 100% start to the season as they were knocked off the top of the Championship table by Nottingham Forest, who beat Bolton 3-0.
Reading's opener came after Watford keeper Manuel Almunia could only punch a Jobi McAnuff cross to Le Fondre, who sent a first-time volley into the top corner.
The Royals were on top and deservedly extended their lead when Karacan latched on to an Alex Pearce header across goal to score at the second attempt after his initial shot had been saved.
Faraoni nodded home from close range to reduce Watford's deficit, only for Karacan to respond.
Deeney's coolly taken spot-kick set up an exciting finish and, when a deflected shot fell into Fabbrini's path, he completed Watford's comeback.
Reading manager Nigel Adkins:
"It was a cracking game of football. It really was. But for a late deflection we could have won the game.
"We changed our formation to play against a side who are very good. We got on the front foot. It was an excellent goal from Adam Le Fondre and then we did well to go in at half-time 2-0 up and we deserved that.
"They got themselves back in it with a header but then Jem got his second and at 3-1 up you are in a good position and then we gave away a penalty.
"Was it a penalty, wasn't it? It doesn't really matter because it was given by the assistant referee. And then it was game on and very exciting and they got a goal at the end.
"The game was far too open and we gave possession away too easily we could not see the game out thanks to a deflection falling into the path of their player. There were a lot of positives going forward and we played good football, and but for a late deflection we could have been celebrating."
Watford boss Gianfranco Zola:
"It feels good not to lose that game. It was difficult to see how we could get anything at half-time when we were 2-0 down.
"I told the players at half-time that it was not enough. I thought we were scratching their back and they were punishing us.
"It pleased me that we never gave up. That is the good thing about this side, sides can score one or two goals against us but we will not be beaten easily. I am delighted we have that quality.
"There are a lot of new players in the squad and lots of them are foreign and maybe they thought that the game builds slowly like in some other leagues, but they need to learn to start games with a high intensity or they will be punished."
Live Text Commentary
Full Time The referee ends the match.90:00 +5:04
Free kick taken by Danny Guthrie.90:00 +4:41
Lewis McGugan concedes a free kick for a foul on Danny Guthrie.90:00 +3:58
Free kick taken by Alex McCarthy.90:00 +3:51
Free kick awarded for an unfair challenge on Wayne Bridge by Marco Faraoni.90:00 +2:14
Reece Brown takes a shot and went wide right of the target.90:00 +2:03
Clearance by Alex Pearce.90:00 +1:49
Corner from the right by-line taken by Almen Abdi.90:00 +1:13
Ikechi Anya produces a cross.90:00 +0:31 Goal scored
Goal! - Diego Fabbrini - Reading 3 - 3 Watford Diego Fabbrini scores a right footed goal. Reading 3-3 Watford.89:28
Lewis McGugan takes a shot.85:37
Alex McCarthy restarts play with the free kick.85:25
Alex Pearce fouled by Javi Acuna Caballero, the ref awards a free kick.83:27
Corner from the right by-line taken by Almen Abdi.82:51 Substitution
Substitution Garath McCleary on for Jem Karacan.82:03
Adam Le Fondre takes the chance to get an effort at goal and missed to the left of the net.81:16
Corner taken by Almen Abdi from the .80:54
Sean Morrison makes a clearance.80:46
Marco Faraoni sends in a cross.79:56
Centre by Javi Acuna Caballero.
Wayne Bridge crosses the ball in from the free kick.78:34 Booking
Gabriele Angella goes into the book for unsporting behaviour.78:21
Free kick awarded for a foul by Gabriele Angella on Hal Robson-Kanu.75:59 Substitution
Substitution (Watford) makes a substitution, with Javi Acuna Caballero coming on for Fernando Forestieri.75:04 Goal scored
Goal! - Troy Deeney - Reading 3 - 2 Watford Penalty taken right-footed by Troy Deeney and scored. Reading 3-2 Watford.74:24
Penalty awarded for a foul by Danny Guthrie on Diego Fabbrini.73:05 Substitution
Substitution Hal Robson-Kanu joins the action as a substitute, replacing Jobi McAnuff.69:40 Goal scored
Goal! - Jem Karacan - Reading 3 - 1 Watford Jem Karacan grabs a goal with a right foot finish. Reading 3-1 Watford.69:08
Nick Blackman takes a shot.68:31 Substitution
Substitution Daniel Williams joins the action as a substitute, replacing Royston Drenthe.67:53
Lloyd Doyley takes a shot and missed to the right of the net.67:38
Corner taken by Almen Abdi from the left by-line.67:04
Corner taken by Almen Abdi from the right by-line.66:24
Fernando Forestieri takes a shot. A parry by Alex McCarthy prevents the goal.65:38 Goal scored
Goal! - Marco Faraoni - Reading 2 - 1 Watford Marco Faraoni scores with a header. Reading 2-1 Watford.65:38
Assist on the goal came from Almen Abdi.65:38 Goal scored
Goal! - Marco Faraoni - Reading 2 - 1 Watford Marco Faraoni scores with a header. Reading 2-1 Watford.65:05
Corner taken by Almen Abdi.64:48
Sean Morrison manages to make a clearance.64:33
Fernando Forestieri delivers the ball.62:16
The ball is sent over by Marco Faraoni.62:00
Free kick taken by Reece Brown.61:49
Nick Blackman challenges Ikechi Anya unfairly and gives away a free kick.61:37
Sean Morrison takes the free kick.61:18
Free kick awarded for a foul by Lewis McGugan on Adam Le Fondre.60:59
Clearance by Wayne Bridge.60:09
Header at goal by Troy Deeney.59:56
Ikechi Anya sends in a cross.59:29
Almen Abdi takes the free kick.59:17
Free kick awarded for a foul by Jobi McAnuff on Fernando Forestieri.59:00
Lloyd Doyley restarts play with the free kick.58:21 Substitution
Substitution Diego Fabbrini comes on in place of Santos Iriney.57:57
Jobi McAnuff concedes a free kick for a foul on Almen Abdi.57:22
Sean Morrison restarts play with the free kick.57:18
The assistant referee signals for offside against Troy Deeney.56:24
Santos Iriney restarts play with the free kick.56:11
Free kick awarded for an unfair challenge on Troy Deeney by Danny Guthrie.54:25
Corner from the right by-line taken by Almen Abdi.53:42
Fernando Forestieri takes a shot.51:34
Free kick taken by Reece Brown.49:35
Free kick awarded for an unfair challenge on Marco Faraoni by Jem Karacan.48:24
Almen Abdi takes the free kick.48:04
Booking for Nick Blackman.48:04 Booking
Nick Blackman concedes a free kick for a foul on Fernando Forestieri.46:44
Corner taken by Jobi McAnuff.45:01
The second half begins.45:01 Substitution
Substitution Joel Ekstrand leaves the field to be replaced by Reece Brown.45:00 +2:08 Half time
Half Time The match has reached half-time.45:00 +0:12
Gabriele Angella takes the free kick.45:00 +0:06
Nick Blackman concedes a free kick for a foul on Joel Ekstrand.44:51
Sean Morrison restarts play with the free kick.44:32
Foul by Joel Ekstrand on Nick Blackman, free kick awarded.41:55 Goal scored
Goal! - Jem Karacan - Reading 2 - 0 Watford Jem Karacan scores a left footed goal. Reading 2-0 Watford.40:09
Jem Karacan has an effort at goal.39:58
Danny Guthrie restarts play with the free kick.38:26
Royston Drenthe fouled by Almen Abdi, the ref awards a free kick.36:46
Manuel Almunia restarts play with the free kick.36:38
Chris Gunter goes into the book.36:38 Booking
Foul by Chris Gunter on Fernando Forestieri, free kick awarded.35:43
Jem Karacan delivers the ball.35:35
Royston Drenthe restarts play with the free kick.35:15
Danny Guthrie fouled by Santos Iriney, the ref awards a free kick.33:43
Corner taken by Almen Abdi from the left by-line.32:59
Shot by Fernando Forestieri went wide left of the target.32:23
Corner taken by Jobi McAnuff.32:07
Manuel Almunia makes a clearance.31:57
Corner taken by Royston Drenthe from the right by-line.31:42
Clearance made by Joel Ekstrand.30:41
Adam Le Fondre takes a shot.30:07
Lewis McGugan takes a shot. Alex McCarthy safely holds on.27:34
Clearance made by Danny Guthrie.27:09
Corner from the left by-line taken by Almen Abdi.26:15
Lewis McGugan restarts play with the free kick.26:06
Jem Karacan challenges Fernando Forestieri unfairly and gives away a free kick.25:40
Santos Iriney restarts play with the free kick.25:26
Free kick awarded for an unfair challenge on Joel Ekstrand by Alex Pearce.25:16
Free kick crossed by Jobi McAnuff.24:50
Booking for Marco Faraoni.24:50 Booking
Marco Faraoni challenges Royston Drenthe unfairly and gives away a free kick.22:59
Wayne Bridge delivers the ball.22:51
Free kick taken by Danny Guthrie.22:41
Foul by Almen Abdi on Jobi McAnuff, free kick awarded.21:08
Corner from the left by-line taken by Almen Abdi.20:24
Fernando Forestieri has an effort at goal. Alex McCarthy parries the ball away.18:56
Manuel Almunia takes the free kick.18:53
The assistant referee flags for offside against Adam Le Fondre.18:31
Royston Drenthe crosses the ball in from the free kick.17:52
Danny Guthrie fouled by Almen Abdi, the ref awards a free kick.16:06
Santos Iriney takes the free kick.15:57
Danny Guthrie is penalised for handball and concedes a free kick.14:37
Corner taken by Royston Drenthe.13:54
Nick Blackman takes a shot and missed to the right of the goal.13:11
Troy Deeney takes a shot.9:30
Wayne Bridge takes the free kick.9:06
Troy Deeney is adjudged to have handled the ball.7:57 Goal scored
Goal! - Adam Le Fondre - Reading 1 - 0 Watford Adam Le Fondre scores a left footed goal. Reading 1-0 Watford.7:01
Free kick crossed by Jobi McAnuff.6:43
Foul by Marco Faraoni on Jobi McAnuff, free kick awarded.3:49
Corner from the right by-line taken by Royston Drenthe.0:53
Free kick crossed by Royston Drenthe.0:40
Free kick awarded for a foul by Joel Ekstrand on Royston Drenthe.0:00
The match begins.
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