Skipper Stephen Foster plundered the winner as Barnsley came from behind with two goals in two minutes.
Watford keeper Richard Lee was in defiant mood as Barnsley battled back as they trailed to a Tommy Smith opener.
But the home side finally found a way through in the 68th minute when sub Miguel Mostto drilled in a shot from 15 yards that Lee touched but couldn't stop.
Lee pulled off more heroics seconds later with a tremendous double save to twice deny livewire Jamal Campbell-Ryce.
With Watford on the rack Foster forced the ball over the line in the 70th minute after Denis Souza clipped the ball into the six-yard box following a corner.
Barnsley had come close to an early opener when Campbell-Ryce whipped in a superb cross from the right, but Jon Macken's glancing near-post header was saved brilliantly by Lee.
And when Kayode Odejayi's clever pass set up Macken he spun cleverly but slammed his rising shot onto the bar.
Lee Williamson went close for Watford as his curling shot drifted just wide. Tamas Priskin though should have claimed the lead after 36 minutes but hoisted a shot over the top after Jodi McAnuff did well.
And Barnsley saw a glorious chance of a lead go begging a minute before the break. A slip by Jay Demerit left Odejayi with only the keeper to beat, but the big striker's attempt at a clever flick over Lee failed and the keeper pawed away the ball.
Watford struck just eight minutes into the second half after a slick build-up that saw McAnuff drill in a low angled ball and Smith diverted it past Heinz Muller at the near post.
But then Barnsley bounced back in style when they stunned the visitors with two quickfire goals.