Captain Deeney scored his first goal from open play in 27 matches in the 79th minute of what was at times a drab affair to seal Javi Gracias second win in charge.
Victory moves Watford up to 10th, one point behind Everton and six points clear of the relegation zone.
For Everton, their miserable away form continues with Sam Allardyces side picking up just one win on the road since a 1-0 victory at Crystal Palace on January 21, 2017.
Both sides struggled in what was a lacklustre opening 45 minutes, with chances few and far between neither team showed any real ambition in attack.
Evertons best moment came in the 18th minute when Tom Davies, who was making his 50th Premier League appearance, released Oumar Niasse and the Senegal strikers deflected effort was parried away by Orestis Karnezis at his near post.
Gerard Deulofeu, who was later forced from the field because of injury, was Watfords only bright spark in the first half and he combined with Etienne Capoue, but the midfielders shot sailed high over the crossbar.
After the break, Everton almost broke the deadlock when Michael Keanes header nearly picked out the far corner.
Gracia reacted by sending on Stefano Okaka and Kiko Femenia in the 56th minute and the latter almost broke the deadlock when benefitting from Jordan Pickfords poor clearance. However, the England goalkeeper atoned for his error with a smart save to deny the substitute.
Watford were ahead moments later when Deeney produced one of the few moments of quality in the game, turning in the penalty area after being picked out by Okakas pass before powering an unstoppable shot past Pickford with 11 minutes remaining.
