The 32-year-old secured his first top-10 finish in Portugal
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Pierre-Emerick Aubameyang looked to have the Gunners well on course for a comfortable three points when he struck twice in 11 minutes before the break.
However, Sanchez Flores, who was appointed as Hornets' boss for the second time last week after one point from their opening four games of the season saw Javi Gracia sacked, roused the hosts for an impressive second-half fightback.
Arsenal played a huge part in their own downfall too as they gifted possession away inside their own box for Tom Cleverley to pull a goal back before David Luiz upended Roberto Pereyra, who slotted home the resulting penalty.
A point sees Arsenal only move level with Manchester United, Tottenham, Chelsea and Leicester behind Liverpool and Manchester City in the early season battle for a top-four finish.
However, it is Watford who will feel they should even have gone onto win the game as Arsenal boss Unai Emery's inability to find a balance between his brilliant attack and shoddy defence continued.
Emery recalled Mesut Ozil to his starting line-up for the first time since he and Sead Kolasinac were the victims of a carjacking attack in July.
Ozil initially struggled to settle as Watford started the brighter with Cleverley's rising drive forcing Bernd Leno into a fine save before Jose Holebas fired horribly off-target with a great chance from the edge of the area.
However, Watford have now conceded 10 goals in their opening five games to the campaign and were opened up far too easily to allow Aubameyang to open the scoring on 21 minutes.
The home fans were screaming for a foul as Dani Ceballos won back possession, but Watford were slow to react as Kolasinac burst down the left and fed Aubameyang, who spun and fired low past Ben Foster.
Ozil was involved as a patient build-up from the visitors doubled their lead on 32 minutes.
At the end of a 20-pass move, Ozil freed Ainsley Maitland-Niles in behind the Watford defence and the right-back squared for Aubameyang to slot home his fifth goal in as many games this season.
Twice the visitors escaped gifting Watford a way back into the game when Matteo Guendouzi was caught in possession on the edge of his own box, trying to play out from the back.
But Arsenal did not learn their lesson and were finally punished when Sokratis Papastathopoulos gifted possession to Gerard Deulofeu and the Spaniard teed up Cleverley to shot low past Leno.
Watford were then in the ascendancy as Deulofeu curled just wide, Ismaila Sarr scuffed a great chance for his first goal in English football off target and Pereyra's flicked finish flashed across goal.
They finally got the equaliser their second-half display deserved nine minutes from time when Pereyra was clipped by Luiz inside the box and the Argentine sent Leno the wrong way from the penalty spot.
Deulofeu sent another effort inches wide and Cleverley's fierce drive was deflected over by Luiz as wave upon wave of Watford attack continued.
But is was Abdoulaye Doucoure who squandered the best chance of all for a winner deep into stoppage time when he shot too close to Leno with just the German goalkeeper to beat to leave Watford still bottom of the Premier League table.Results
Premier League
Bournemouth 3 Everton 1
Watford 2 Arsenal 2
La Liga
Eibar 1 Espanyol 2
Alaves 0 Sevilla 1
Celta Vigo 0 Granada 2
Bundesliga
Hoffenheim 0 Freiburg 3
Paderborn 1 Schalke 5
Serie A
Genoa 1 Atalanta 2
Brescia 3 Bologna 4
SPAL 2 Lazio 1
Parma 1 Cagliari 3
Ligue 1
Nantes 1 Reims 0
Saint-Etienne 2 Toulouse 2
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