Tom Ince's late goal maintained Blackpool's unbeaten run and sent them top of the Championship, consigning Watford to a first loss of the season.
The Hornets were awarded a penalty early on, but Troy Deeney's spot-kick was saved by the impressive Matt Gilks.
And they hit the post twice through Marco Faraoni and Diego Fabbrini.
Blackpool were the better side in the second period, with Nathan Delfouneso having an effort ruled out for offside before Ince's effort sealed the points.
The winger collected the ball in the final third and ran at the defence before drilling a shot into the corner of the net.
Four wins and a draw makes this Blackpool's best start to a league season since 1935.
But the unbeaten visitors were on top throughout the first half, denied by Gilks.
And when Neal Bishop brought down Almen Abdi in the box, the Seasiders' keeper excelled to deny Deeney from the spot.
The Scotland goalkeeper was soon in action again, rushing out to deny defender Gabriele Angella.
When they did get past Gilks, the visitors were denied by the woodwork - Faraoni hitting the post from Ikechi Anya's cross and Fabbrini also striking the upright.
Despite Watford's pressure, the score remained goalless at half-time, and it was Paul Ince's Blackpool side who came out brighter in the second period as Isaiah Osbourne flashed a header narrowly wide.
Delfouneso did have the ball in the net but was ruled offside, and substitute Ince sent an effort just off target.
Former Arsenal goalkeeper Manuel Almunia then tipped over Barry Ferguson's in-swinging free-kick to keep Blackpool at bay, but Ince's superb strike nine minutes from time won it for the home side.
Blackpool manager Paul Ince:
"If it had been a boxing match it would have been all over at half-time. Watford were outstanding in the first half and if they had scored the penalty it would have been a different game.
"We rode our luck and sometimes you earn your luck. When you have central midfielders, one at right-back and the other at centre-half, you're going to ride your luck.
"Gilks made a fantastic save from a penalty. I couldn't wait to talk to them at half-time. We showed them too much respect."
Watford manager Gianfranco Zola:
"I cannot believe we lost the game. Actually I can, it happened last season a few times. We had complete domination and then we got sloppy in the second half.
"It was like Millwall away last year, but even more so. This is the Championship, that's why people say it's such a difficult Championship.
"It was a superb goal from a superb player, I don't have any complaints. They scored a great goal and I was the first one to clap."
Live Text Commentary
Full Time The referee ends the match.90:00 +4:15
Fernando Forestieri has an effort at goal and missed to the right of the target.90:00 +3:40
Manuel Almunia takes the free kick.90:00 +3:21
Foul by Ricardo Fuller on Ikechi Anya, free kick awarded.90:00 +3:06
Barry Ferguson takes the free kick.90:00 +2:45
The referee cautions Joel Ekstrand for unsporting behaviour.90:00 +2:45 Booking
Free kick awarded for a foul by Joel Ekstrand on Isaiah Osbourne.90:00 +1:47
Corner taken by Barry Ferguson.90:00 +0:58
Matt Gilks takes the free kick.90:00 +0:48
Foul by Javier Acuna on Isaiah Osbourne, free kick awarded.89:43 Substitution
Substitution James Caton is brought on as a substitute for Nathan Delfouneso.88:00
Ricardo Fuller takes the chance to get an effort at goal.87:38
Kirk Broadfoot manages to make a clearance.87:30
Free kick taken by Manuel Almunia.87:23
Unfair challenge on Marco Faraoni by Nathan Delfouneso results in a free kick.87:04
Barry Ferguson restarts play with the free kick.86:44
Free kick awarded for a foul by Gabriele Angella on Ricardo Fuller.85:59
Shot by Fernando Forestieri went wide of the left-hand post.85:17 Substitution
Substitution Sean Murray is brought on as a substitute for Santos Iriney.
Substitution (Watford) makes a substitution, with Javier Acuna coming on for Almen Abdi.83:02
Free kick taken by Almen Abdi.82:49
Nathan Delfouneso gives away a free kick for an unfair challenge on Marco Faraoni.81:27 Booking
Neal Bishop receives a yellow card.80:22
Angel Martinez provided the assist for the goal.80:22 Goal scored
Goal! - Tom Ince - Blackpool 1 - 0 Watford Tom Ince scores with their left foot. Blackpool 1-0 Watford.79:49
Troy Deeney makes a clearance.79:39
Corner taken by Barry Ferguson from the right by-line.79:03
Free kick taken by Barry Ferguson.78:53
Unfair challenge on Angel Martinez by Marco Faraoni results in a free kick.78:23
Barry Ferguson takes the free kick.78:08
Unfair challenge on Tom Ince by Joel Ekstrand results in a free kick.77:03
Clearance by Troy Deeney.76:46
Corner taken by Barry Ferguson.76:26
Shot on goal comes in from Barry Ferguson from the free kick. Fine finger tip save by Manuel Almunia.75:51 Booking
Gabriele Angella receives a caution.75:38
Free kick awarded for a foul by Gabriele Angella on Ricardo Fuller.73:35
Header by Ricardo Fuller goes over the bar.73:20
Free kick taken by Barry Ferguson.72:57 Booking
Santos Iriney receives a caution.72:48 Substitution
Substitution Fernando Forestieri joins the action as a substitute, replacing Diego Fabbrini.72:25
Free kick awarded for an unfair challenge on Barry Ferguson by Santos Iriney.69:05
Shot by Marco Faraoni went harmlessly over the bar.67:11
Neal Bishop restarts play with the free kick.67:05
Free kick awarded for a foul by Troy Deeney on Kirk Broadfoot.66:40
Shot by Tom Ince went wide right of the net.66:10
Marco Faraoni restarts play with the free kick.65:47 Substitution
Substitution Tom Barkhuizen leaves the field to be replaced by Tom Ince.65:25 Booking
Angel Martinez is shown a yellow card.65:07
Free kick awarded for a foul by Angel Martinez on Gabriele Angella.64:43
Marco Cassetti takes a shot.64:33
Ikechi Anya delivers the ball.59:59
Manuel Almunia takes the free kick.59:51
The official flags Nathan Delfouneso offside.59:26
Clearance by Gabriele Angella.59:21
Barry Ferguson takes the free kick.59:05
Free kick awarded for an unfair challenge on Nathan Delfouneso by Marco Faraoni.58:23
Matt Gilks restarts play with the free kick.58:16
Troy Deeney concedes a free kick for a foul on Kirk Broadfoot.56:20
Ricardo Fuller takes a shot and goes over the bar.55:14
Header at goal by Chris Basham misses to the right.54:58
Corner taken by Barry Ferguson.54:44
Free kick taken by Kirk Broadfoot.54:36
Foul by Santos Iriney on Jack Robinson, free kick awarded.53:54
Clearance made by Gabriele Angella.53:47
Free kick crossed by Barry Ferguson.53:04
Joel Ekstrand concedes a free kick for a foul on Ricardo Fuller.52:44
Santos Iriney restarts play with the free kick.52:33
Free kick awarded for a foul by Barry Ferguson on Almen Abdi.52:07
Header by Kirk Broadfoot misses to the right of the target.51:57
Corner taken by Barry Ferguson from the left by-line.51:39
Free kick taken by Kirk Broadfoot.51:09
Free kick awarded for a foul by Almen Abdi on Kirk Broadfoot.49:00
Clearance by Joel Ekstrand.48:56
Centre by Tom Barkhuizen.48:20
Corner taken by Barry Ferguson.47:50
Ricardo Fuller has an effort at goal.47:22
Ikechi Anya takes the chance to get an effort at goal. Matt Gilks safely holds on.45:01
The second half kicks off.45:00 +2:10 Half time
Half Time The players leave the pitch at half time.45:00 +0:59
Lewis McGugan has an effort at goal and missed to the left of the goal.44:16
Barry Ferguson takes a shot. Manuel Almunia catches the ball.43:28
Shot by Almen Abdi missed to the right of the net.43:02
Diego Fabbrini takes a shot and hits the post.42:42
Diego Fabbrini has an effort at goal.39:56
Lewis McGugan takes a shot. Matt Gilks parries the ball away.39:34
Header at goal by Lewis McGugan strikes the woodwork.39:28
The ball is sent over by Almen Abdi.39:13
Corner taken by Ikechi Anya.38:13
Gabriele Angella restarts play with the free kick.38:07
Ricardo Fuller concedes a free kick for a foul on Gabriele Angella.36:59
Direct strike on goal from the free kick by Lewis McGugan goes left of the target.36:13
Barry Ferguson is booked.36:13 Booking
Barry Ferguson concedes a free kick for a foul on Diego Fabbrini.34:46
Kirk Broadfoot makes a clearance.34:42
A cross is delivered by Marco Faraoni.32:26
Tom Barkhuizen crosses the ball.30:24
Barry Ferguson restarts play with the free kick.30:19
Troy Deeney challenges Chris Basham unfairly and gives away a free kick.29:11
Shot by Marco Faraoni missed to the right of the net.27:20
Joel Ekstrand makes a clearance.27:02
Jack Robinson takes the free kick.26:52
Santos Iriney gives away a free kick for an unfair challenge on Ricardo Fuller.26:01
Marco Faraoni delivers the ball.25:04
Barry Ferguson restarts play with the free kick.24:57
Free kick awarded for a foul by Santos Iriney on Angel Martinez.24:03
Lewis McGugan takes the chance to get an effort at goal. Matt Gilks safely holds on.23:40
Free kick taken by Joel Ekstrand.23:22
Foul by Angel Martinez on Diego Fabbrini, free kick awarded.21:25
Corner taken by Almen Abdi from the right by-line.21:05
Centre by Marco Faraoni.20:26
Clearance by Gabriele Angella.19:28
Headed chance falls to Gabriele Angella. Matt Gilks catches the ball.19:21
Corner from the left by-line taken by Almen Abdi.18:58
Gabriele Angella has an effort at goal. Matt Gilks parries the effort to safety.18:43
Free kick crossed by Almen Abdi.18:18
Jack Robinson booked.18:18 Booking
Free kick awarded for a foul by Jack Robinson on Marco Faraoni.15:37
Barry Ferguson takes the free kick.15:07
Free kick awarded for an unfair challenge on Barry Ferguson by Santos Iriney.13:18 Penalty
Penalty taken by Troy Deeney is saved by Matt Gilks. Blackpool 0-0 Watford.12:08
Neal Bishop gives away a Penalty for an unfair challenge on Almen Abdi.10:54
Free kick taken by Matt Gilks.10:43
Diego Fabbrini concedes a free kick for a foul on Chris Basham.8:05
Free kick taken by Joel Ekstrand.7:52
Ricardo Fuller is ruled offside.7:35
Corner from the right by-line taken by Almen Abdi.7:08
Troy Deeney takes the chance to get an effort at goal. Matt Gilks turns it away with a finger tip save.5:38
The ball is sent over by Lewis McGugan.4:22
Header by Troy Deeney goes to the left of the goal.4:02
Almen Abdi takes a shot.3:02
Corner from the right by-line taken by Barry Ferguson.2:51
Santos Iriney makes a clearance.2:41
Corner from the right by-line taken by Barry Ferguson.0:00
The game begins.
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