Rodgers is back in England’s top flight for the first time since October 2015 when he was sacked at Liverpool following his appointment as Claude Puel’s replacement earlier this week.
And it looked like being a respectable start to his Foxes reign as Jamie Vardy’s 10th goal of the season cancelled out Troy Deeney’s early header.
But the game ended in the same way as it started as Gray struck in the closing moments to inflict an opening defeat on Rodgers and deliver a fourth win from five for the Hornets.
Rodgers, who opted to leave Celtic despite going for a treble treble, could not have envisaged a worse start to his tenure as his new side fell behind inside five minutes.
They were lucky not to go behind in the second minute as Leicester goalkeeper Kasper Schmeichel blocked Deeney’s effort and then Wes Morgan brilliantly blocked Gerard Deulofeu from the rebound.
But it was only a temporary reprieve as Deeney headed home Deulofeu’s free-kick from close range for the Watford striker’s eighth of the season.
That was definitely not in the script for Rodgers and his side tried to get themselves back in the game. They dominated possession but created little, with Vardy getting no service and Harvey Barnes and James Maddison being denied space.
Watford had rarely threatened since their explosive opening, but they came close to doubling their lead early in the second half.
Abdoulaye Doucoure found space on the edge of the area and unleashed a shot, which forced Schmeichel into a flying save.
The game reverted to its first-half state as Leicester enjoyed plenty of possession but still did not do much with it and it looked difficult to see how they were going to get back into the game.
They almost did it with an outrageous piece of luck in the 75th minute as Wilfred Ndidi’s wayward cross got caught in the wind and sailed over Ben Foster and onto the crossbar.
And a minute later the Foxes were level and it is the type of goal seen many times from them over the past few seasons. Vardy positioned himself in between the two centre-backs and Youri Tielemans’ through-ball was perfect for the former England striker to race on to and clip a smart first-time finish past Foster.
Leicester would have fancied their chances of going on to win it as Morgan flashed a header wide from Maddison’s enticing cross.
But there was a sting in the tail for Rodgers as the club where he started his managerial career in 2008 won it in injury time.
A poor clearance found its way to Deeney, who hooked the ball on to Gray to run on to and fire through Schmeichel’s legs.