Watford grabbed a goal through Hassane Kamara to make it 2-1 but failed to match City’s quality and edged closer to relegation.
Jesus scored his first of the day after four minutes when he found himself on the end of Oleksandr Zinchenko‘s cross.
The hosts doubled their lead 20 minutes later after Jesus headed home from a stunning Kevin de Bruyne delivery.
Kamara pulled a goal back for Watford moments later but City bounced back before the break when Rodri’s long-range effort smashed into the top corner.
City were awarded a penalty 15 seconds into the second half when Jesus was brought down by goalkeeper Ben Foster.
Following a long VAR check, Jesus stepped up and completed his hat trick from the spot to make it 4-1.
The striker grabbed his fourth goal after 53 minutes by finishing off a fine counter attack from City.
Jesus became the first Brazilian to score four goals in a single Premier League game.
The reigning Premier League champions continue to hold a slight advantage in the title race while Watford remain six points from safety.
“If there’s one person who deserves the best in life for him, his family and his friends, it’s Gabriel,” Guardiola told Sky Sports after the game.
“All of us at the club, when he has one of these situations, we’re happy for him because he’s so generous. It doesn’t matter what position he’s going to play, we know how he fights for his mates. He’s fantastic.”