The Watford captain, recalled to Quique Sanchez Flores' starting XI, scored a first-half penalty and added an impressive second late on to take Watford's points total to 36, and his team to the brink of safety.
Emmanuel Adebayor headed his first goal for Palace before Deeney's winner, but again the Eagles, who finished with 10 men after Pape Souare's late dismissal, suffered because of a lack of goals.
Palace manager Alan Pardew had earlier spoken of his belief that much of his team's recent struggles - they last won in the league on December 19 - owed much to the collective absences of, at various periods, Yannick Bolasie, Yohan Cabaye and Connor Wickham
Cabaye returned during last week's 1-1 draw at Swansea and Wickham was again available following suspension, but it was still surprising that Pardew recalled new signing Adebayor in place of Chung-yong Lee on the left of his front three.
Unlike Palace, and despite losing 1-0 to Tottenham last Saturday, Watford already appear to have recovered from their own mid-season inconsistencies
Regardless, Sanchez Flores made seven changes to his team in recalling Deeney, Sebastian Prodl and Valon Behrami, and gave a first league start to January signing Nordin Amrabat.
If there was a temptation to suspect Watford would be unsettled by those changes, however, it quickly subsided with their intelligent use of possession and Palace's flat start.
Even with Cabaye in Palace's midfield, Watford patiently retained the ball and frustrated their opponents, so the nature of the opening goal perhaps came as little surprise.
From Ben Watson's 16th-minute corner, Palace's Mile Jedinak dragged Deeney to his knees, leaving referee Robert Madley with no option but to award a penalty which Deeney calmly sent to Wayne Hennessey's left as the goalkeeper went right.
Watford's patience continued to be rewarded by Palace's lack of a goalscoring threat
As the first half progressed it became clear they required a moment of inspiration, even if there was little sign of who would provide it.
When, on the stroke of half-time, Wickham sent a hopeful cross into the Watford area, it arrived from nowhere, through Adebayor heading high beyond former Tottenham team-mate Heurelho Gomes and into the back of the net on his third appearance for his latest team.
Recognising Lee's greater comfort on the left wing and that Wickham had otherwise scarcely contributed, Pardew replaced the striker at half-time and with Lee's presence they rediscovered the mobility they so often thrive with in the final third.
Lee forced the latest reaction save from Gomes in the 79th minute when unexpectedly shooting from a wide free-kick, but again a winning goal eluded Palace and they were punished.
In the 82nd minute, Watson crossed from the right wing into Palace's penalty area and, after a deflection, Deeney impressively controlled possession with a classy touch before shooting under Hennessey to seal victory.
In the closing minutes, Cabaye's volley struck the post from the edge of the area, and Souare was rightly sent off for a two-footed challenge on Behrami.