Defender Sanchez headed in from Son Heung-min’s cross as Antonio Conte continued his unbeaten league start with Spurs, who climbed to fifth in the table.
Hornets goalkeeper Daniel Bachmann denied Son Heung-min at close range in the second half, after Lloris had produced an equally superb save from Josh King at the other end.
Joao Pedro had a late penalty appeal dismissed after Spurs goalkeeper Hugo Lloris raced out of his goal to deny the forward.
The game was paused in the closing stages because of a medical emergency in the crowd, leading to eight minutes of stoppage time.
Tottenham reduced the gap to fourth-placed Arsenal to two points, having played two games fewer than their north London rivals, after the Gunners lost 2-1 to leaders Manchester City earlier on Saturday.
A club record-equalling sixth consecutive top-flight defeat leaves Watford 17th, two points above the bottom three, having played two games more than Burnley directly below them.
Spurs continue to build momentum under Conte
Conte became the first Tottenham manager to avoid defeat in his first seven league matches in charge amid the frustration of Tuesday’s draw with 10-man Southampton – and the extension of that run at Vicarage Road ensured Spurs are firmly in contention for a Champions League place at the start of the year.
It threatened to be another exasperating day for the Italian and his team, as Watford defended resolutely during a first half in which Spurs had 73% possession and 26 touches in the Watford box compared with three for the hosts.
Kane was unable to extend his scoring run to a fourth league match, shooting wide following a first-half defensive error by Imran Louza – while Bachmann was equal to the England striker’s attempt shortly after the restart.
Wing-backs Sergio Reguilon and Emerson Royal were unable to deliver quality crosses as several Spurs attacks faltered and Watford looked set to register a first Premier League clean sheet of the season.
Reports this week claimed Ranieri is already under pressure at Vicarage Road – with this a ninth defeat in 11 games since the Premier League-winning manager succeeded Xisco Munoz in October.
Though substituted at half-time after a below-par first half on Saturday, the fine goalscoring form of Emmanuel Dennis has offered hope for Watford in their fight for survival. It is their shortcomings in defence which threaten to prove fatal.
This disciplined performance, despite defeat, will offer optimism for Ranieri in that regard – before two crucial league games against the bottom two sides, Newcastle and Norwich.
“What a pity, that is football and we continue to fight. We are alive and we will survive,” Ranieri told BBC Sport.
“I am very proud, also our fans should be proud because the team fought until the end.”
Conte, meanwhile, awaiting a meeting with the club to determine what business can be done in the January transfer window, will undoubtedly be searching for quality reinforcements with Spurs seeking a top-four finish.
The Spurs manager said: “Honestly, when Tottenham put me in charge, I asked for time to make my evaluation about the squad. Now I have and for sure we will have a meeting.
“It is important always to be honest, to understand where we are at in this moment and then I will see. January is not simple, but maybe we will see what happens,” he added.