Ozan Tufan's penalty ensured Hull ended Watford's Championship play-off hopes.
City had won one of their previous eight games but the recalled Tufan converted from the spot on 24 minutes.
Tigers keeper Karl Darlow then produced a superb late save to deny Ismaila Sarr and ensure a seventh clean sheet in eight in front of their own fans.
The Hornets are winless in eight on the road and, having sat third on 20 January, slipped into the bottom half three points ahead of the Tigers.
In a low-key start Joao Pedro fired a loose ball over the City bar after seven minutes, while at the other end Callum Elder headed over a good chance at the far post from Jean Michael Seri's cross.