West Ham looked to be in pole position after Michail Antonio took his tally to four goals in four games with an impressive brace in the opening 33 minutes.
The Hammers fans were treated to another incredible piece of skill from Dimitri Payet who produced a rabona cross to set up Antonio for the second goal.
But the home side failed to hold on and goals from Odion Ighalo, Troy Deeney, Etienne Capoue and Jose Holebas helped Watford secure their first Premier League win of the season,
In a crazy start to the game, the Hammers could have opened the scoring inside the opening sixty seconds.
Antonio weaved his way into the penalty area and saw his low shot kept out by the legs of Heurelho Gomes.
The rebound fell to Payet and he close-range effort produced another fine save by Gomes diving low to his right hand side
But the home side didn't have to wait much longer before breaking the deadlock.
Antonio rose the highest to meet a corner from Payet on five minutes and directed a powerful header into the corner of the net.
Antonio caused all kinds of problems for the Watford defence once again on eight minutes and his cross was turned against his own post by Daryl Janmaat.
Just seconds later Watford could have made the home side pay as Roberto Pereyra broke clear of the Hammers defence and crossed in for Ighalo who had the goal at his mercy but his shot deflected inches past the post.
It was an incredible opening to the game and the chances continued as Manuel Lanzini raced unchallenged towards goal and fired a shot just past the post.
Watford raced down the other end and Adrian made a fine save to deny Ighalo's close-range volley.
The Hammers doubled their lead in spectacular fashion on 33 minutes after Arthur Masuaku's ball picked out Payet down the right hand side.
The Frenchman produced an outstanding piece of skill as his rabona cross picked out Antonio and he made no mistake heading the ball into the back of the net.
But Hammers failed to hold onto their lead and Watford staged a dramatic comeback which started on 41 minutes.
Ighalo picked up the ball down the left hand side and took on Sam Byram, before seeing his right-foot shot deflect take a wicked deflection off James Collins and the ball flew past Adrian.
In an amazing turnaround Watford managed to draw level on the stroke of half-time.
Collins and Adrian got themselve in a tangle and the loose ball fell to Deeney, who chipped the ball expertly into the corner of the net.
The equaliser gave Watford the upper hand and they came out in the second half brimming with confidence.
The away side took the lead on 53 minutes when Pereyra crossed the ball in for Capoue who fired a powerful shot past Adrian into the roof of the net.
Watford sealed all three points on 64 minutes when Ighalo picked out Holebas and he fired his shot past Adrian to round off a miserable afternoon for the home side.
Slaven Bilic will be hoping his side can bounce straight back when they travel to face West Brom at the Hawthorns next Saturday.
West Ham: Adrian; Byram (Tore 84), Collins, Reid, Masuaku; Noble (Calleri 68), Kouyate; Antonio, Lanzini, Payet; Zaza (Fletcher 76)
Subs not used: Randolph, Nordtveit, Obiang, Ogbonna
Bookings: Zaza, Byram
Watford: Gomes (GK); Cathcart, Kaboul (Prödl 81), Britos; Janmaat, Capoue, Pereyra, Behrami, Holebas; Deeney (Okaka 77), Ighalo (Success 68)
Subs not used: Pantilimon (GK), Zuniga, Watson, Guedioura
Bookings: Cathcart, Okaka
Referee: Martin Atkinson
Attendance: 56,974