A ruthless attacking display from City saw Sterling move onto a career best 19 Premier League goals for the season with his first half brace, before Phil Foden and Aymeric Laporte completed a fine victory.
Sterling opened the scoring with an unstoppable drive that flew into the top corner and doubled the lead when he tapped in the rebound after Ben Foster saved a penalty City’s No.7 had won.
Foden added a third after the Hornets' goalkeeper kept out another Sterling effort and the unmarked Laporte headed home Kevin De Bruyne’s free-kick to ensure the scoreline reflected the one-sided nature of the game.
City’s first half performance was much improved from the one that left Guardiola so frustrated against Arsenal, as we assumed control immediately.
Foster made a superb early save to keep out Rodrigo’s 30-yard drive after it deflected off Gabriel Jesus and it set the tone for a busy evening for the host’s goalkeeper.
With City comfortably on top, Foden snapped a shot wide of the post, before Sterling collected Walker’s cross and dispatched a venomous strike into the top corner to open the scoring.
He made it 2-0 before the break, bamboozling the Watford defence with his trickery and winning a penalty from Will Hughes’ trip.
Foster made a brilliant one-handed save from the spot-kick, but he was powerless to stop the winger tapping the rebound into the far corner.
It was proving to be something of a one-man duel for the Watford ‘keeper and he made fine saves to deny Jesus, Sterling and Kevin De Bruyne's 25-yard free-kick.
He did the same again to keep out another Sterling effort, but it fell invitingly for Foden who guided it into the empty net.
Ismaila Sarr dragged a rare chance wide for the host’s as Ederson adopted the role of a spectator, before Laporte lost his marker to guide a teasing De Bruyne delivery into the far corner.
Ederson was finally called into action in the closing stages, as Danny Welbeck was played in behind the City defence, but the Brazilian was quick off his line to smother the ball and ensure it was a perfect night at both ends.
It might have got even better for City, but Jesus had an injury time headed ruled out when he was flagged offside.
The perfect response
Guardiola did nothing to disguise his frustration with aspects of the performance against Arsenal and if he wanted a response, he certainly got one here.
This was City at our relentless best, as wave after wave of attack threatened the Watford goal.
Despite defending resolutely in the early stages and Foster's performance not deserving such a scoreline, Hayden Mullins' side eventually wilted under the pressure.
City were fluid, moving the ball expertly and it was a deservedly comprehensive victory.
Guardiola said beforehand that we are best at 'full gas' and that was certainly evident here.
PEP: Desire was there
“I said before, be ourselves. We can play better or worse but there is a minimum in desire and passion and we showed it today.
“You have to do everything to win the game. It is not about winning or losing."
Man of the match - Raheem Sterling
His brace leaves him two shy of a century for City and on 29 in all competitions this season.
He scores all kinds of goals, as evidenced by his sensational opener and is a threat no matter where he pops up in the final third.
A match-winner to be counted on.
We have scored 12 Premier League goals against Watford in 2019/20, the joint-most by a team against an opponent in a season along with Blackburn vs Nottingham Forest in 1995/96 and Spurs vs Wigan in 2009/10.
What it means
We have already guaranteed second place, so our seventh Premier League win since the restart does not alter our position in the table.
We now have 78 points from 37 games and are 15 points ahead of Chelsea, who face Liverpool on Wednesday.
We host already relegated Norwich City in our final league game of the campaign on Sunday 26 July.
Kick-off is at 16:00 (UK) and we'll have live coverage here on mancity.com.
We then have 12 days to prepare for our Champions League last 16 second leg clash against Real Madrid, which takes place on Friday 7 August at the Etihad Stadium.
CITY: Ederson, Walker (Zinchenko 64'), Garcia, Laporte (Stones 74'), Cancelo, Rodrigo, De Bruyne (C), Bernardo, Foden, Sterling (Mahrez 64'), Jesus.
SUBS: Carson, Gundogan,Silva, Mendy, Fernandinho, Otamendi.
WATFORD: Foster, Mariappa, Kabasele, Dawson, Femenia, Doucoure (Chalobah 82'), Cleverley, Hughes, Sarr, Pereyra (Masina 87'), Deeney (Welbeck 67').
SUBS: Gomes, Cathcart, Joao Pedro, Gray, Quina, Pussetto.