A big penalty shout from Palace within the opening 10 minutes of a scrappy first half was turned down by referee Martin Atkinson after winger Wilfried Zaha appeared to have been pushed down by Craig Cathcart in Watford's penalty area.
Deeney's horror moment came in the 68th minute after Yohan Cabaye swung a free-kick into the Watford box, which should have been easily dealt with by their skipper, but the striker diverted the ball into the bottom corner.
The victory lifted Palace to 16th in the table, four points above the relegation zone, while Watford remain 13th.
(Reporting by Shravanth Vijayakumar, Editing by Ed Osmond, Neville Dalton)
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