Arsenal started the game brightly, with an early goal from Bukayo Saka ruled out for offside. Continuing to make chances for the majority of the first half, the north London side were dominant through many spells of the fixture.
The breakthrough finally came for Arsenal as Smith-Rowe slid home a loose ball on the edge of the box, scoring his third goal in as many Premier League appearances for the first time in his career.
The only goal of the games proved to be a point of contention for the respective managers at full-time, as Watford coach Claudio Ranieri argued that Arsenal should have played the ball back to the hornets after a stoppage for injury - the goal stood nevertheless.
21-year-old Smith-Rowe has hit top form of late, proving to his manager and the Arsenal faithful that he his indeed worthy of the famous number 10 shirt at The Emirates.
The Gunners came very close to grabbing a second, as the fresh-legged substitute Martin Odegaard picked up the ball in the penalty area, neatly guiding the ball to the far corner beyond Ben Foster, but a final touch from an offside Pierre-Emerick Aubameyang meant the goal would not stand.
Minutes later, Arsenal's lead was nearly lost, as goalkeeper Aaron Ramsdale found himself stranded outside his box, with Watford's Josh King narrowly missing the target from a tight angle - a huge let off for a lapse in concentration.
Arteta and his squad will take confidence from the fact that despite his side certainly not performing to their maximum capacity, they still managed to wrangle all three points from the Hornets.
In the absence of midfield general Thomas Partey,, Ainsley Maitland-Niles stepped into the fold, putting in an exemplary performance that earned him the man of the match award.
Both strong defensively and creative looking forward, the 24-year-old looked as confident as ever as he anchored the midfield alongside new-boy Albert Sambi Lokonga.
There was yet another impressive performance for Ben White, who is looking to be making a reliable partnership with Gabriel. Many question marks were raised when the Gunners splashed out £50 million on the young Englishman, but each week he proves more of his doubters to be wrong.
Despite positive performances in many facets of Arsenal's game, skipper Pierre-Emerick Aubameyang had a more than difficult afternoon, missing a penalty and arguably being at fault for both of the Gunners disallowed goals.
The Gabonese forward looked uncharacteristically off the pace, struggling to make the impact that he has been making in many of Arsenal's games this season.
Arteta and his coaching staff will be hoping that this afternoon's performance from the captain will be nothing more than a blip, as the Premier League sides head into the busy Christmas schedule.
The fixtures do not get any easier for Arsenal, as they take the dreaded trip to Anfield next Saturday. Games of football do not get much more difficult around the globe, with the imperious form that Liverpool are currently displaying.
But for the Gunners, there is no better time to take the trip to Merseyside, as they have now extended their unbeaten run in all competitions to 10 games - their best form on paper since January/February 2020.