Deeney converted from the penalty spot in the second half to force a share of the points.
Deeney, who had been dropped from the starting XI after failing to score in the past 10 matches, converted from the penalty spot in the second half to force a share of the points.
Yohan Cabaye -- who scored the winner in the corresponding match last season -- had given Palace the lead in the first half and Allardyce, installed after Alan Pardew was sacked last Thursday, could have been celebrating all the points if Christian Benteke had converted a first-half penalty.
Allardyce, who lost the England job after just one match because of ill-judged remarks to undercover reporters, said his side had been too profligate.
"It's two points dropped for me," said Allardyce.
"In some ways that's encouraging in your first game, away from home.
"On the balance of what happened it should have been a win but from our point of view there were too many chances thrown away."
Deeney, who has scored all four of the goals his side have netted against Palace in the last three games, said finally reaching the landmark was a huge relief.
"It's nice to finally get it," said Deeney, who has a way to go to become Watford's record scorer as Luther Blissett tops the chart with 186.
"I've been having a bit of a stinker recently, so it's a huge weight off my shoulders. I thought I was poor against Sunderland so the gaffer had every right to drop me," added the 28-year-old.
The draw leaves Palace precariously placed fourth from bottom on 16 points -- with just one win in 12 games -- and they could drop into the bottom three if Sunderland beat Manchester United later on Monday.
Watford's form has slipped alarmingly with just one win in their last six games, and the draw extended their woeful Boxing Day record of not having won for 30 years.
It took almost 25 minutes for either side to fashion a chance with Palace eventually the ones to threaten.
Benteke could have shot after working himself into a great position but dallied too long -- the ball came to Cabaye whose shot went wide of the post.
A minute later the talented Frenchman made no mistake from inside the box after being superbly set up by Andros Towsend. Played onside by compatriot Younes Kaboul, the 30-year-old made no mistake.
Palace should have gone 2-0 up in the 37th minute when a wild challenge by Watford goalkeeper Heurelho Gomes on Benteke gifted the visitors a penalty -- the Brazilian was fortunate to escape without even a booking from referee Mark Clattenburg.
Gomes, though, redeemed himself, getting down to save Benteke's soft penalty which was the Belgian international's second miss from the spot this term.
In a nice touch the sides exited at half-time to 'Last Christmas' sung by George Michael, whose death at 53 was announced on Sunday and who had been brought up in the county Watford lies in Hertfordshire.
Watford took the game to Palace in the opening exchanges of the second half but fashioned very little in the way of chances.
However, they got the break they needed with 20 minutes remaining when Damien Delaney was penalised for tugging Sebastian Proedl's shirt in the box and Deeney drilled the resulting spot-kick down the midpremierdle.
The barrel-chested striker celebrated in robust style as he became the fifth Hornets player to bring up a century of goals.