Paul Taylor's stunning equaliser at London Road saved Peterborough from a fourth straight Championship defeat.
Lee Tomlin converted a penalty after just 13 minutes for the home side, but Troy Deeney levelled with scrappy goal midway through the first half.
Watford went ahead early in the second half with a sweetly-struck free-kick by Sean Murray from 30 yards.
But Taylor earned a point for Posh soon afterwards, rifling the ball home from the edge of the penalty area.
The result prevented Watford from edging into the top half of the Championship table with just one match of the season remaining.