Coventry hit Watford in the second half to take all three points home from Vicarage Road.
In what was a lacklustre performance for their recent standards, Watford missed the chance to cement their place in the top six.
The winning goal was scored just five minutes into the second half when the impressive Viktor Gyökeres finished Jamie Allen's cross into the box.
The Swedish striker was causing the hosts problems throughout the game and was the clear standout player on the field.
Watford thought they had taken the lead in the first half, but Keinan Davis' finish was chalked off for an offside in the build up. This was after a bright start by the visitors who went close with Gyökeres early on.
The Hornets should have equalised when Ismaïla Sarr somehow put Hassane Kamara's cross over the bar from two yards out. Apart from that chance they were lethargic going forward and struggled to create many meaningful chances to salvage something from the game.
They came into the game having started to find form under Slaven Bilić and a win would have been their fourth in a row.
Bilić made two changes to the side which beat Cardiff in midweek, with Hamza Choudhury returning from suspension and Keinan Davis fit again to lead the line.
The visitors travelled down from the midlands also in good form after beating high-flying Blackburn in midweek. They made three changes to that side, with captain Kyle McFadzean and Kasey Palmer returning to the starting XI and academy graduate Jack Burroughs making his first start for the club.
It was indeed the sky blues who started on top. Kasey Palmer played in Gyökeres after some intricate build up play but the Swede's shot flew just wide of the post. It was a sign of things to come as the attacking duo were to cause the Hornets defence issues throughout the game.
He went close again just ten minutes later. After getting the better of William Troost-Ekong his shot was tipped wide by Daniel Bachmann.
After a positive start by Mark Robins' men the hosts thought they had taken the lead against the run of play only to be quelled by the linesman's flag. Ismaïla Sarr broke away and his cross was tucked home by Keinan Davis, but Sarr was adjudged to have strayed offside.
It seemed to spring Watford into action and they went close minutes after when Ken Sema's long range free kick had to be tipped past the post by Ben Wilson.
Despite chances falling to Sarr and Gyökeres again in the closing exchanges of the first half the two sides couldn't be separated as they went into the break.
Just minutes after the restart the hosts were inches away from taking the lead, though. Sarr's cross fell to Sema in the area but his finish went agonisingly wide.
Not long after that Gyökeres finally made Watford pay. He was a constant thorn in their side and got on the scoresheet when he turned in Jamie Allen's cross from close range.
It was no more than they deserved but Watford really should have equalised when Sarr somehow missed from a yard out. Yáser Asprilla replaced João Pedro and moments after his introduction he unpicked the Coventry defence with a tantalising ball through to Hassane Kamara. His cross seemed to put the goal on a plate for Sarr, but on the stretch he skied the finish.
They didn't create too much in the way of clear chances despite being a goal down, but substitute Joseph Hungbo's deflected shot on the brink of full time went just wide.
After three wins on the bounce for Watford it's fair to say that Bilić would have expected a stronger performance by his side. Gyökeres and Coventry both turned out to be too strong for them on the day and Watford will look to bounce back against Reading on Tuesday.