United got off to the perfect start after ten minutes, Rob Kozluk found Peter Ndlovu who's inch perfect cross was met by the boot of Wayne Allison.
Watford had few chances minutes later, and Robert Kozluk had to be substituted moments later when he was brought down in his own box. Nick Montgomery replaced.
On 36th minute the most controversy point of the game took place, Heidar Helguson was clear on goal when Phil Jagielka brought him down (TV replay shows that he dived) in box and referee had no other option but to send him off.
The penalty was taken by defender Neil Cox who comfortably converted.
With being down to ten men Neil Warnock brought off Jon-Paul McGovern for Robert Page to fill the gap in the defnce.
A minute later the Hornets took the lead, Paul Robinson worked hard on left hand side and his low cross was side footed in by Icelandic International Hieidar Helguson past Paddy Kenny.
Near end of the half Michael Brown shot wide for Blades as did Helguson for Hornets.
Half-Time: Sheffield United 1-2 Watford
At half-time Michael Boulding made his Blades debut as Stuart McCall came off.
Even with ten men United were clearly the dominant side between them.
Early on Webber was denied a goal and Murphy was booked for a foul on Helguson. on 53rd minute Ndlovu's shot drifted wide of goal.
On hour mark United won a corner, it was taken on left by Brown to far post and was headed back into box by Page and went out again for a corner.
This time it was taken by Tonge and crossed into centre but was cleared by Helguson.
A minute later Brown's free-kick was cleared by Cox and Michael Tonge's hammer driver was brilliantly saved by Chamberlain but Boulding could put it away as he skied it over the bar.
With 15 minutes left another corner taken by Brown was headed by Page into six yard box but no one was their to put it away.
Minutes later United almost scored when Montgomery's cross was met by Murphy but went over bar.
Micah Hyde was booked with ten minutes to go. Six minutes later was given his marching orders by referee Chris Foy after a nasty challenge on Michael Tonge warranted a second Yellow card.
United pilled pressure on Watford half but the Hornets managed to hang on to record a victory.
Full-Time: Sheffield United 1-2 Watford
Man Of The Match: United had to put up with loads of pressure with 10 men and had no option but go for a equaliser while being 2-1 down.
The players played well, I feel they did not deserve to win but did deserve a draw against a tricky opposition. I think that I will give man of the match away to Wayne Allison for the goal.