The Wednesday captain, Danny Maddix, salvaged a point four minutes into stoppage time with his first goal of the season, but First Division survival still looks a target beyond Chris Turner's bottom-of-the-table side, who face relegation for the second time in four seasons.
A first senior goal for Watford substitute Jason Norville eight minutes from time looked to have lifted the FA Cup semi-finalists after a run of four straight League defeats, but Maddix's near-post header from virtually the last move of the game spared Wednesday a third reverse in four games.
Even so, with still five points to make up on 21st place and safety, the odds are stacked against the Owls escaping the drop, which leaves them facing the grim prospect of playing in the Second Division only three years after dropping out of the Premiership.
Watford's declining form has raised questions about their own survival. Their manager, Ray Lewington, said afterwards: "Wednesday would probably look at us and say we are well safe, but I don't feel we can relax until we get to 50 points."
Worryingly for Lewington, already with concerns over Marcus Gayle, Heidar Helguson and Allan Nielsen, full-back Paul Robinson and loan- signing Michael Chopra also picked up injuries yesterday.
With Michael Reddy's fine play on the right flank creating a string of opportunities, Wednesday were the better side initially, and it was against the run of play that Watford went ahead after 33 minutes. A corner from the right was not cleared by the home defence, and when the ball reached Tommy Smith the striker managed to turn and tuck the ball past Kevin Pressman from eight yards out.
Wednesday's response was positive, and it took a superb save by Alec Chamberlain, pushing the ball over the bar, to keep Ashley Westwood off the scoresheet. But such near-misses have been all too familiar at Hillsborough this season, with good approach play often lacking a finish.
The absence of Shefki Kuqi – with Finland in Italy – hardly helped yesterday, but Wednesday were given a lifeline when the referee, Neale Barry, decided that Chamberlain's collision with substitute Lloyd Owusu after 65 minutes merited a penalty.
Owusu, limping heavily, lasted only five minutes more but the damage looked accidental and the penalty award, along with a yellow card for the goalkeeper, somewhat harsh.
It mattered not to Lee Bradbury, on loan from Ports-mouth, who slotted home his second goal for Wednesday and gave an edge to the game's final phase, with neither side seemingly interested in settling for a point.
Norville, the 19-year-old forward who had replaced Chopra, looked to have had the last word for Watford when he dispossessed Dean Smith and then finished with some style with the 82rd minute.
The Wednesday substitute Grant Holt, signed from non-League Barrow only on Thursday, missed one chance to level the scores again, but Maddix, who had not scored since November 2001, chose a timely moment to end that barren run.
Sheffield Wednesday 2
Bradbury pen 66, Maddix 90
T Smith 33, Norville 82
Half-time: 0-1 Attendance: 17,086