A Roberto Pereyra penalty with 10 minutes to go completed a second half fightback which saw Watford pick up their second point of the season.
Pierre-Emerick Aubameyang converted both of Arsenal's first half goals, with Tom Cleverley scoring thanks to a defensive mishap early on in the second to get Watford back in the game.
Story of the game
Under the new, yet returning, manager Quique Sanchez Flores, Watford would be hopeful of a good start to get his fresh start at the Hornets underway.
They did start brightly, bringing the ball forward with passages of play which were nicely done. Cleverley went close with a powerful strike tipped over the bar by Bernd Leno. They were pressing Arsenal closely, something that wasn't often seen under Javi Gracia.
However, when Dani Cebellos won possession from Will Hughes on the halfway line - in what could have been a foul - Sead Kolasinac was able to run quickly down the left-wing before finding Aubameyang, who swivelled and volleyed the ball cleanly past Ben Foster, handing Arsenal the lead.
Ten minutes later, it was Aubameyang again who scored. The Watford press fell off and Mesut Ozil found Ainsley Maitland-Niles' run inside the box, who handed the ball on a plate for the Gabonese striker. The home team were ball watching for much of the lead up to their second, and it looked as though Flores' first game back may end in defeat.
However, the his team talk at half time must've been impressive. The Hornets came out looking hungry, none more so than when Gerard Deulofeu pounced on Sokratis' misplaced pass straight from a goal kick, and Cleverley could not miss. Watford were back in the game thanks to a gift.
The Hornets continued to come forward and press the Arsenal back-line, as well as preventing the Gunners from having a sniff of a chance in the second half thanks to some strong interceptions.
Their persistence was rewarded when substitute Roberto Pereyra went down inside the box following a challenge from David Luiz. He sent Leno the wrong way in the resulting penalty and levelled Watford on the scoreline.
But Watford's persistence was not done there; they continued to press, this time in search of a winner, and Deulofeu could not have been much closer when he sent his strike curling slightly round the left-hand post.
Then, in stoppage time, it was Abdoulaye Doucoure's turn to have a run at the Arsenal defence, before finding record-signing Ismaila Sarr on the right-wing. Sarr returned the ball exquisitely but the shot was placed straight at Leno from just a few yards out, in what should've given Watford their first three points of the season.
Takeaways from the match
Watford's spirit important
For every game this season so far, the Hornets had been lacking spirit both defensively and when moving forward. Ultimately the disappointing turn in form led to Gracia's downfall. In the first-half of today, it appeared to be much of the same, even under Flores. But the second-half was a spirit that has not been seen in yellow since their 3-2 comeback victory over Wolverhampton Wanderers at Wembley Stadium. Every man in yellow played their part, and it seems as though Flores spoke something into them at the half-time break. If Watford are able to maintain the spirit shown in the second-half today, there is no way they will be relegated.
High press vital to point
One thing that had been evidently lacking under Gracia was the lack of any sort of press. This appeared to cost the Hornets defensively in the latter stages of last season and in the previous four games. Today, Flores' Watford team pressed the Arsenal defence into making errors - as shown by the first goal - and pressed their attack so the Gunners failed to have a snuff at goal in the second-half. They also pressed themselves, moving forward a lot more quickly than has been seen at times in recent weeks. This high press could prove vital to getting the Hornets points this season and moving them up the table.
Arsenal defensive woes continue
Arsenal's fragile defence has constantly been an issue for fans and it seems as though that is set to continue. Their back-line was a major cause of concern throughout the match, giving Watford far too much time on the ball and allowing them to have a huge 31 shots on goal. They made an error for the first goal and in the end they gave away a penalty as well. Unai Emery will be scratching his head on how to resolve their troubles there.
The Watford midfield
It's tough to narrow down three or four players into one when all of them provided the fans with such an outstanding effort. Cleverley and Doucoure were pivotal in moving the ball forward and create chances a lot of the time on Sunday afternoon, whilst Doucoure's partner-in-crime Etienne Capoue was significant coming forward but even more so when winning the ball back. It's hard to forget about substitute Pereyra - who was looking like the Pereyra of old when he came on the pitch. A superb effort from the midfield.
The Arsenal forward continued his great form with a brace today. His clinicality in front of goal is something that you cannot let get by. In the first-half, he was a major thorn in the home sides back line, helping to finish off the chances that his teammates gave him.