Boro dominated the first half but spurned some good chances then gifted Watford an opener seconds before the break as skipper Rhys Williams chested down a cross in the box for Matej Vydra to pounce and stab home.
In the second half, as Boro chased the game, the lively Czech striker scored another on the break before Scott McDonald clawed back a stoppage-time consolation.
"The first goal was a present from them," he confessed. "We probably didn't deserve to be leading at that point.
"They were the better side in the first half. They had a lot of chances but didn't take them.
"But in the second half we were excellent, as a team and as individuals. We stepped up a level and were much more positive. Everybody was much more tuned in.
"I took a lot of pleasure from the performance because they are a good side and we beat them in their own stadium.
"But we are not perfect, letting a goal in late on showed that. We have to keep working."