Matthew Spring fired a stoppage-time winner at Carrow Road to clinch all the points for promotion-chasing Watford in a five-goal thriller.
It was rough justice on Norwich who had twice taken the lead and although they were lucky to go in at the break a goal up, Nigel Worthington's side played their full part in a thrilling second period.
Canaries' striker Paul McVeigh converted a penalty a minute before the interval, but Darius Henderson levelled two minutes after the restart and equalised again within two minutes after Peter Thorne had given Norwich a second-half lead.
But just as it appeared the points would be shared Marlon King escaped down the right and from his cross Spring steered his shot from 12 yards into the bottom corner.
Norwich started with Thorne and McVeigh up front, with top scorer Dean Ashton missing out with a groin strain and Ian Henderson dropping to the bench, while Watford were unchanged.
Home midfielder Jason Jarrett tested Ben Foster with an early 30-yard shot the Watford goalkeeper was equal to and at the other end Robert Green impressed the watching Sven-Goran Eriksson when he turned away Chris Eagles' goalbound effort for a corner.
Watford's Anthony McNamee fired two long-range efforts wide, but otherwise chances were at a premium until Dickson Etuhu flashed a header wide for Norwich from Simon Charlton's free-kick on the half-hour mark.
Marlon King responded for the visitors, drilling a shot from the edge of the penalty area straight at Green.
Andy Hughes volleyed wide soon after, but Watford finished the first half on top and will be disappointed not to have converted at least one of their chances.
Matthew Spring fired over the crossbar and then volleyed spectacularly against the post from 25 yards, McNamee saw another blockbuster blocked by Jurgen Colin and Darius Henderson's curling 30-yard shot was well held by Green, who then held another shot from King.
But against the run of play Norwich snatched the lead. Mackay's clumsy challenge on McVeigh in the penalty area proved costly and the Northern Ireland striker picked himself up to power home his spot kick, McNamee was denied twice more after successive shots just before the break.
But the Hornets wasted little time in getting back on terms, King crossing from the right and Henderson steering his shot from 12 yards into the bottom corner.
Watford pressed for a second, but Darren Huckerby stole away and Etuhu latched onto his cross only for his shot to be blocked by Mackay.
Norwich then cashed in on another foray from Huckerby down the right. This time his cross found Peter Thorne and the former Cardiff target man planted his header into the bottom corner to give Norwich another unlikely lead in the 62nd minute.
But Watford stormed back onto the offensive with Green denying King's drilled effort before Henderson levelled three minutes later.
King's piledriver from Spring's short free-kick was parried by Green and Henderson pounced to turn in the rebound.
Foster held Craig Fleming's 20-yard shot, Thorne headed over the crossbar and Huckerby blazed wide as Norwich forced Watford onto the backfoot.
Jarrett also volleyed wide, while Gary Doherty blocked King's shot from the edge of the area as both sides searched for the winner.
And with the game in stoppage time Spring latched onto King's right-wing cross to plant a low shot beyond Green for Watford's winner.
Teams
Norwich Green, Colin, Fleming, Doherty, Charlton, Jarrett, Hughes, Etuhu, McVeigh (Henderson 66), Thorne, Huckerby.
Subs Not Used: Gallacher, Shackell, Brennan, Spillane.
Goals: McVeigh 44 pen, Thorne 62.
Watford Foster, Doyley, Mackay, DeMerit (Carlisle 66), Stewart, Eagles (Bangura 71), Mahon, Spring, McNamee (Bouazza 71), Henderson, King.
Subs Not Used: Chamberlain, Chambers.
Goals: Henderson 47, 65, Spring 90.
Att: 25,384
Ref: M Atkinson (W Yorkshire).