With the out-of-form hosts desperately seeking a way back into the game, Hornets keeper Ben Foster flapped at an 86th-minute cross, with Alli controlling with his shoulder before turning the ball into the net.
The video assistant referee reviewed the goal and decided it was correctly awarded. The big screen, however, indicated the decision was ‘no goal’. After a spell of confusion, the goal stood.
For large periods before Alli’s intervention, it had looked as though Mauricio Pochettino’s side were going to suffer a fifth defeat in six games.
Watford, who lost Danny Welbeck to an early hamstring injury, took the lead when Abdoulaye Doucoure swept home Daryl Janmaat’s cross.
And they had a strong penalty appeal turned down by referee Chris Kavanagh – and the VAR – when Jan Vertonghen brought down Gerard Deulofeu.
But, leading for 80 minutes, their wait for a first Premier League win continues and they remain bottom.