The Hornets went into the game knowing a win would take them back into the automatic promotion places following Middlesbrough’s victory at Norwich on Friday.
They looked as though they would have to settle for second after Matt Ritchie put Bournemouth ahead against Sheffield Wednesday and on course for top spot, but Chris Maguire’s stoppage-time penalty at the Goldsands Stadium denied the Cherries and left Watford on top of the pile.
The decisive goal at Vicarage Road came in the 56th minute when substitute Ikechi Anya crossed from the left and Cathcart sent a fine volleyed finish into the top corner past goalkeeper Darren Randolph.
Despite looking good in possession going forward, it took the Hornets almost 20 minutes to begin to open up the Birmingham defence.
They were unfortunate not to take the lead, though, when a fine pass from Adlene Guedioura created the opportunity for Troy Deeney who was denied by a good save with his legs by Randolph. The ball then broke for Matej Vydra, whose follow-up was deflected up and onto the crossbar.
Vydra and Guedioura threatened before the home side went close again when the ball was played into Almen Abdi and he spun superbly away from his man to shift the ball onto his left foot before curling a shot narrowly wide of the far post.
Watford continued to press for the breakthrough in the remainder of the first half but they were unable to seriously threaten again before the interval.
But it was a double change from manager Slavisa Jokanovic in the 54th minute that was to prove the catalyst for his side taking the lead as he brought on Anya and Odion Ighalo for Miguel Layun and Vydra.
Within two minutes, Anya had been released down the left by Deeney and the Scotland international’s first-time cross into the near post was met by a superb effort over his right shoulder by Cathcart.
Having gone in front, Watford missed a great chance to double their lead a couple of minutes later when Almen Abdi’s floated free-kick picked out the unmarked Gabriele Angella, but he headed over the top.
Angella had another chance and on this occasion he did nothing wrong, meeting an Abdi corner with a downward header only to see it cleared off the goal-line.
There was little else in the way of goalmouth action, with the drama instead coming on the south coast as Jokanovic’s men were left with their destiny in their own hands.