It was the first time in over a decade that such a fate has befallen a Mourinho-managed team.
After a promising start to the season, including victory at Wembley in the FA Community Shield, United's woes began with last weekend's defeat to city rival and English Premier League leader Manchester City.
Thursday's lackluster loss to Feyenoord in the Europa League
has been followed by another EPL defeat at Vicarage Road -- Watford's first win over United in 30 years.
United's record signing Paul Pogba rattled the woodwork with a first-half effort, but in-form midfielder Etienne Capoue struck his fourth goal in six games to put the host ahead.
United improved after the break and when teenager Marcus Rashford was quick to react to put the visitor level just after the hour mark it looked ominous for Watford.
But Hornets boss Walter Mazzarri introduced Juan Camilo Zuniga off the bench, and the Colombian scored with his first touch of the ball on 83 minutes from Roberto Pereya's pass.
Zuniga, on loan from Napoli, was then fouled by Marouane Fellaini in injury time -- and Troy Deeney converted from the spot to complete a famous victory.
Watford's first win over United since 1986 left Mourinho -- who replaced Louis van Gaal in May
-- frustrated with his squad.
"We started the season very well and had good results. I feel the first moment we had a defeat, a difficult situation, some of the boys are having a bit of difficulty coping with the negativity," the former Chelsea, Inter Milan and Real Madrid coach said.
The outspoken Portuguese could not resist a dig at referee Michael Oliver, believing there had been a foul on Anthony Martial leading up to Capoue's opening goal, but he also rued his side's 'individual and collective mistakes."
A crucial moment came when the scores were level and summer signing Zlatan Ibrahimovic's header was kept out brilliantly by Heurelho Gomes before the late intervention by Zuniga.
"We were the better team when we lost," Mourinho claimed.
Later Sunday, Tottenham Hotspur moved up to third with a 1-0 home win over struggling Sunderland. England striker Harry Kane scored the winner in the second half but was later stretchered off with an ankle injury.
In other matches, Crystal Palace thrashed bottom club Stoke 4-1 and Southampton edged Swansea 1-0.
In Spain, Real Madrid claimed top spot from arch-rival Barcelona with a 2-0 win at Espanyol.
Goals in each half from James Rodriguez and Karim Benzema sealed a comfortable victory for the European champion, which maintained its 100% record after four games in La Liga.
In Italy, Serie A champion Juventus lost 2-1 at Inter Milan, which came from behind to secure its second win in five games thanks to second-half goals from Mauro Icardi and Ivan Perisic.
Napoli ended the weekend on top of the table, one point clear of Juve, following Saturday's 3-1 over Bologna.