Yannick Bolasie headed the Eagles into a sixth-minute lead only for Troy Deeney to level early in the second half.
But Connor Wickham nodded home the winner just after the hour mark to send Palace into only the second FA Cup Final in their history.
Crystal Palace 2-1 Watford
Emirates FA Cup semi-final
Wembley Stadium connected by EE
Sunday 24 April 2016
Neither Palace nor Watford have won The FA Cup, and both clubs have only been runners-up once each; Watford in 1984 and Palace six years later. And they knew the 11-time winners were waiting for them in next month’s showpiece.
If the atmosphere at Saturday’s semi-final neared fever pitch at times, it was nothing compared to the noise that greeted the Eagles’ opening goal.
Yohan Cabaye swung in a corner from the left, Damien Delaney flicked it on at the near post and Bolasie rose above Deeney at the opposite stick to nod home – and send the Palace fans into raptures.
It was a goal reminiscent of Alan Pardew’s famous semi-final winner against Liverpool in 1990 and it had the red and blue end of Wembley bouncing.
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The Hornets were rocked by the early setback and looked to their captain for inspiration – and Deeney provided, embarking on a couple of surges forward from midfield before bending a shot just over the top.
There was a heart-in-the-mouth moment for Palace right-back Joel Ward soon after when he cushioned Allan Nyom’s deep cross out for a corner, with the ball bouncing just centimetres past the upright.
Described in the matchday programme by The Guardian’s Dominic Fifield as Palace’s classiest player, Cabaye twice came close to doubling his side’s lead, but Costel Pantilimon denied him both times.
The first effort, from range, was parried away by Watford’s giant keeper before he held on to a free-kick from the diminutive Frenchman.
Etienne Capoue’s afternoon was ended with just half an hour on the clock after an innocuous off-the-ball clash with Bolasie. The former Spurs man tried to play on but fell to the ground and was replaced by Mario Suarez.
The second half began at a blistering pace. Referee Craig Pawson waved away Palace appeals for a penalty when Wickham tangled with Miguel Britos.
Then Bolasoe drove into the area from the left and smashed a low, angled shot goalwards which Pantilimon saved with his legs. And then came the equaliser.
Jose Jurado delivered a corner which Deeney glanced home in front of the Watford fans – and suddenly the Hornets were buzzing. Their joy, though, was short-lived.
Palace left-back Papa Soare collected a set-back from Bolasie and whipped a delicious cross towards Wickham. The big Eagles frontman rose above Nathan Ake and nodded the ball beyond Pantilimon’s desperate dive for the game’s third headed goal.
Pawson dismissed Palace appeals for a penalty for a second time when Nyom challenged Zaha inside the box after a lung-bursting run by the winger.
Watford tried to rally in the final 10 minutes as Odion Ighalo fired over and Jurado forced Wayne Hennessey to save a daisy-cutter from 20 yards. And then Adlene Guedioura, Watford’s quarter-final hero against Arsenal, scuffed a shot just wide.
Zaha hit the side-netting when Palace countered late on but the work had already been done and Pardew’s men can now look forward to Saturday 21 May with relish.
Crystal Palace (4-2-3-1): 13 Wayne Hennessey; 2 Joel Ward, 6 Scott Dann, 27 Damien Delaney, 23 Papa Souare; 7 Yohan Cabaye, 15 Mile Jedinak (captain); 10 Yannick Bolasie, 42 Jason Puncheon, 11 Wilfried Zaha; 21 Connor Wickham.
Substitutes: 18 James McArthur for Bolasie 74, 26 Bakary Sako for Puncheon 81, 25 Emmanuel Adebayor for Wickham 86.
Substitutes not used: 1 Julian Speroni, 16 Dwight Gayle, 28 Joe Ledley, 34 Martin Kelly.
Goals: Bolasie 6, Wickham 61
Manager: Alan Pardew
Watford (4-4-2): 18 Costel Pantilimon; 2 Allan Nyom, 3 Miguel Britos, 15 Craig Cathcart, 16 Nathan Ake; 22 Almen Abdi, 23 Ben Watson, 29 Etienne Capoue, 7 Jose Manuel Jurado; 9 Troy Deeney (captain), 24 Odion Ighalo.
Substitutes: 4 Mario Suarez for Capoue 32, 17 Adlene Guedioura for Abdi 56, 21 Ikechi Anya for Nyom 83.
Substitutes not used: 1 Heurelho Gomes, 5 Sebastian Prodl, 8 Valeron Behrami, 20 Steven Berghuis.
Goal: Deeney 55
Bookings: Jurado, Suarez, Deeney
Manager: Quique Sanchez Flores
Referee: Craig Pawson
Assistant referees: Lee Betts and Michael Mullarkey
Fourth official: Michael Oliver.
Emirates FA Cup highlights: Crystal Palace 2-1 Watford