The point edged the Hornets closer to safety while Neil Warnock's side are set to miss out on the play-offs after failing to force the victory they desperately needed.
In truth, a draw was just about a fair result as neither side did enough to merit victory.
Watford overcame the loss of Brynjar Gunnarsson with a groin injury in the warm-up to start the brighter of the two sides, with Chris Eagles, in his last appearance before returning to Manchester United, at the centre of all their best moments.
Eagles created the first chance after just two minutes, his jinking run and low centre finding Ashley Young in space, but he mis-kicked completely just 12 yards out.
A deep free-kick from the midfielder also forced Paddy Kenny to punch clear under pressure from Neil Cox and Jay Demerit.
The Blades took a while to get going but produced the game's first effort on target just before the half hour when the lively Steven Kabba forced a smart save at the near post by veteran keeper Alec Chamberlain.
Knowing nothing less than three points would be sufficient to maintain their promotion push Warnock switched to a bold 4-3-3 at half time, introducing Jon Forte for injured centre-half Chris Morgan.
Forte made an immediate impact when he forced a low save from the assured Chamberlain just a minute after being introduced.
Although Sheffield United looked more likely to break the deadlock it was Watford who came the closest to scoring just before the hour. A deep cross from Young was met with an acrobatic effort from Eagles that crashed against the bar.
Warnock went for broke in the closing stages and threw on striker David Johnson with ten minutes remaining but chances were few and far between as the game petered out into a disappointing draw.