The England international grabbed a goal and two assists for Jamie Vardy as the Foxes closed the gap to the top six.
Maddison, fresh from starring in Thursday’s Europa League win over Legia Warsaw, shone again while Ademola Lookman’s strike also helped Leicester claim just a third win in 10 Premier League games in blizzard conditions.
Ranieri was axed by Leicester in 2017, nine months after winning the title in a season that is likely to never be repeated.
Then, the Foxes were a point above the relegation zone. Now Ranieri returned with his fifth club since leaving the King Power, aiming to keep Watford up.
He received a standing ovation from the home fans and took the acclaim as they sung his name but, aside from Josh King and Emmanuel Dennis’ goals, that was as good as it got for the 70-year-old.
The Hornets, who remain 16th, were good value and showed promise, only for defensive errors and Maddison to pick them apart.
They started on the back foot and Daniel Bachmann turned Vardy’s near-post drive behind but Leicester, without a league clean sheet since the opening day, remained shaky at the back despite Jonny Evans shrugging off a thigh problem.
His miscommunication with Kasper Schmeichel nearly let King in while Caglar Soyuncu’s weak header allowed Moussa Sissoko to find Dennis, whose effort deflected narrowly over.
The Hornets had shown enough to suggest they could worry Leicester only for Ranieri’s side – or more specifically William Ekong – to gift the hosts a 16th-minute lead.
Evans launched a harmless ball forward that should have been comfortable for Ekong but the defender ducked underneath expecting Bachmann to collect.
He had not seen Maddison stealing in behind him and the midfielder seized the chance by finding the corner of the net.
Watford were undeterred, though, and Schmeichel denied Dennis before Cucho Hernandez’s 20-yard strike hit Soyuncu and looped onto the inside of the post.
If Leicester thought they had escaped, they were mistaken, as Watford continued to press and got their reward from the spot after half an hour.
Wilfred Ndidi’s reckless trip on Dennis gave referee Andrew Madley little option and King beat Schmeichel for his fifth goal of the season.
Yet the Hornets were undone four minutes later by a piece of Maddison brilliance. The 25-year-old clipped an exquisite pass over the top for Vardy and he lifted the ball over an advancing Bachmann from an angle, celebrating in front of his old boss.
Eight minutes later, the former England striker made it 3-1 when he again combined with Maddison to glance in his corner. Vardy scored 24 times when Ranieri took Leicester to the title in 2016 and had given the Italian a reminder of his talents.
Yet the Foxes needed Schmeichel to thwart King from close range after Hernandez – who should have shot himself – teed him up soon after the break.
As the snow got worse so did Leicester’s defending, and Watford grasped a lifeline when Dennis robbed Timothy Castagne to dink over Schmeichel.
But it was another false dawn as Lookman added a fourth for the Foxes, tapping in Harvey Barnes’ cross soon after.
A stretching Ozan Tufan poked just wide for Watford with six minutes left but there was no way back.