Liverpool were without first-choice goalkeeper Alisson due to a shoulder injury and paid the price for some shambolic defending at Villa Park, with John McGinn adding to Watkins' treble in a rampant opening period for Dean Smith's men.
Mohamed Salah doubled his tally either side of deflected goals for debutant Ross Barkley and Grealish, who contributed three assists in a brilliant display.
Adrian's hopes of keeping a clean sheet were dashed within four minutes when his wayward pass to Joe Gomez was seized upon by Grealish, who squared for Watkins to slot home.
Liverpool did not get a penalty for McGinn's contentious challenge on Salah, while Emiliano Martinez saw a similar error to Adrian's go unpunished before Watkins latched onto another Grealish pass and fired into the top-right corner.
Salah halved the deficit, yet Villa's two-goal cushion was restored two minutes later when McGinn's wickedly deflected volley found the bottom-left corner.
Watkins completed his treble before the first half was out by turning home Trezeguet's cross and former Everton midfielder Barkley extended their lead 10 minutes after the restart, aided by a significant touch off Trent Alexander-Arnold.
Salah swept in a cool finish in the 60th minute but any hopes of a late charge were quickly extinguished by a Grealish strike that hit Fabinho to wrongfoot Adrian.
Adrian managed to stop Watkins netting a fourth before Gre
alish made the most of a baffling decision to try to catch him offside on the halfway line, scoring his second.
Watkins rattled the crossbar in the 85th minute but Liverpool were already set to suffer one of the most remarkable defeats in Premier League history.
A first for Klopp
Villa were in searing form and became the first team to put at least four goals past Liverpool in the opening half of a Premier League game since Klopp took charge in October 2015.
In fact, the only time the Reds have conceded four in the opening period of a game in any competition during the German's tenure came on the same ground, when they went down 5-0 to Villa in the EFL Cup quarter-finals.
However, on that occasion it was a second-string line-up and Klopp was not even in the dugout, as the first-team squad were away at the Club World Cup.
