With Middlesbrough losing 4-3 at Fulham, while Norwich City drew 1-1 at Rotherham, Watford were sure of promotion and a potential cash boost of more than 120 million pounds.
Troy Deeney's neat finish after 28 minutes, his 21st league goal of the season, and a stoppage-time strike by Matej Vydra secured the win for the Italian-owned club who were last in English soccer's top flight in 2006-07.
"It's incredible," manager Slavisa Jokanovic told Sky Sports television. "I'm very happy for my players, for my staff, for the people that work in the kitchen and for our supporters.
"I'm a little surprised because I didn't expect everything to be all over today. We made a great job of it and many people around me helped me so much.
"The players did a great job and the supporters helped us and believed in the possibility of us getting promoted," added Serb Jokanovic, a former Chelsea midfielder.
McCORMACK TREBLE
With second-placed Bournemouth not playing Bolton Wanderers until Monday, the pressure was on Middlesbrough and Norwich City to close Watford's four-point lead at the top.
Goals from Michael Turner and a penalty from Ross McCormack gave Fulham a 2-0 lead at Craven Cottage but Adam Reach pulled a goal back for Boro in the 65th minute.
The visitors' cause was not helped when McCormack converted his second penalty after George Friend was sent off but they staged an unlikely comeback thanks to goals from Daniel Ayala and Kike.
However, the hard work was undone when McCormack completed his hat-trick in injury time to leave Aitor Karanka's Middlesbrough third with 84 points from 45 games.
Fourth-placed Norwich needed three points against lowly Rotherham to deny Watford promotion and Gary Hooper's second half goal sent them on their way after Lewis Grabban's dismissal in the opening period.
But Jordan Bowery struck a crucial equaliser for Rotherham, who were deducted three points on Friday for fielding an ineligible player earlier in the season.
Rotherham remain 21st after Millwall drew 3-3 against sixth-placed Derby County.
With only the top two gaining automatic promotion, the race for the playoff places is also hotting up.
Ipswich Town are fifth after a 2-1 victory over Nottingham Forest, while Brentford and Wolverhampton Wanderers (75) are two points outside the playoff places after 2-0 and 1-0 wins over Reading and Wigan Athletic respectively.
Wigan's home defeat to Wolves meant the club, who dropped out of the Premier League in 2013, will go down to League One if Rotherham take a point from their home game to Reading on Tuesday.
(Reporting by Ed Osmond and Michael Hann, editing by Alan Baldwin)
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