Neil Warnock's side had taken only six points from a possible 21 during a poor run of league form that saw them slip briefly out of the play-offs.
But Lester, preferred by boss Warnock to new loan signing Izale McLeod, lashed home from close range to secure the Blades a second successive league win and Gray scored his third in as many matches since arriving from Bradford, slotting home from McLeod's pass in the third minute of time added on.
The visitors edged a high-tempo first half, but were forced onto the back foot for much of the second as Watford dominated possession while creating few scoring chances.
Michael Tonge was first to show when he sent a 25-yard shot over the crossbar in the fourth minute, while centre-half Chris Morgan ghosted forward shortly after to head Dries Boussatta's near-post corner narrowly wide for the visitors.
Neal Ardley failed to get his header on target from Paul Devlin's cross as Watford responded, but in a see-saw opening clear-cut chances were
few and far between.
Blades striker Lester, back in the starting line-up in place of Ashley Ward for the first time since January due to a knee injury, saw his clever lob from the edge of the penalty area drift wide.
Paul Mayo then caught the eye for Watford in only his second match since being snapped up from Lincoln by Ray Lewington.
The young defender volleyed first-time from 30 yards from Ardley's cleared corner, forcing Kenny into another smart save, while counterpart Lenny Pidgeley pulled off an equally impressive stop when denying Lester's drive from the edge of the area.
Kenny saved again from Heidar Helguson's close-range header before the Blades snatched the lead just before half-time. Two consecutive Boussatta corners had the home side on the back foot and after they failed to clear the second Lester was first to react, lashing the ball home from close range.
Phil Jagielka almost made it 2-0 when he drilled a 25-yard shot just over with the last kick before the break.
Four minutes after the restart Wright let fly from 30 yards, but Pidgeley was equal to it, while Kenny saved from Fitzgerald close-range effort and Mark Rankine blocked a goalbound shot from Gavin Mahon as Watford rallied.
Lewington replaced Fitzgerald with Lee Cook as Watford looked to get back on level terms, but although they dominated second-half possession, the Hornets created little in front of goal.
Warnock withdrew Boussatta and sent on Paul Shaw to stiffen up his midfield and soon after replaced Lester with McLeod.
But a flashing volley in the last minute from Bruce Dyer, a late replacement for Helguson, was the closest Watford came to rescuing a point, while Gray despatched McLeod's cross from close range to make sure for the Blades.