Palace shook off Sunday’s disappointing defeat in fine fashion as three goals in 23 minutes saw the side return to winning ways and take their place at the top of Group C.
However, the team had to battle out a tough first-half as Watford enjoyed the majority of chances inside the opening 45 minutes.
Annabel Johnson and Lia Cataldo came back into the defence with Natalia Negri returning in between the sticks and all three coolly slotted back into the backline.
Ellie Head had the first chance of the game on the sixth minute as she broke into the Palace box, but Negri was on hand to safely push the ball around her post.
It was then Palace’s chance in front of goal as Lexi Potter won the ball back inside the box on the ninth minute before drilling an effort towards goal, but Jacqui Goldsmith got down to collect.
Negri was called into action again on the 23rd minute as Coral Haines hit a dangerous cross into Palace territory but the young shot stopper got up to meet the ball.
Aimee Everett met a corner kick from Paige Bailey-Gayle 12 minutes later, but she could only guide her over the goal.
Negri’s impressive shift between the sticks continued in the second half as she got down to stop a close-range shot from Flo Fyfe two minutes after the restart.
Palace then took hold of the game’s reins as they enjoyed a second half of entertaining attacking football.
Isabella Sibley brought the ball down on the 50th minute and pulled the trigger on a shot from 22 yards out but Goldsmith got down to smother the ball.
The opener then didn’t take long as Kirsten Reilly got the ball rolling with her first of the season on the 51stminute. Watford failed to clear their lines and the ball eventually found Potter on the edge of the area, her shot was blocked but fell to Reilly who calmly slotted it through the keeper’s legs.
Araya Dennis was then introduced on the 71st minute and she made an instant impact as she made it two only seconds later. Other substitute Shanade Hopcroft rolled a pass through to the youngster who fired home a first time shot.
Elise Hughes then got her routine goal as she sealed the win with her 13th of the campaign as she turned home a great cross from Sharpe.
A draw between Lewes and London City Lionesses elsewhere in Group C saw Palace move from bottom to top of the standings with an all to play for game against London City coming up in the New Year.
Palace: Negri (GK), Reilly (Gibbons 79), Johnson, Everett, Cataldo, Arthur, Potter (Dennis, 71), Guyatt, Sibley (Sharpe, 62), Bailey-Gayle (Hopcroft 71), Hughes
Subs: Lambourne (GK)
Watford: Goldsmith (GK), Meiwald, Reid, Henson, Leon (Davison, 69), Wilson (Rossiter, 46), Harbert, Georgiou, Haines, Fyfe (Lafayette, 84), Head (Baptiste, 69)
Subs: Harris (GK), Fleming, Johns, Chandler, Palisch