City led 2-0 at halftime through David Silva and Sterling and effectively sealed the deal when Kevin de Bruyne came off the bench to smash in the third after 61 minutes.
Gabriel Jesus slotted the fourth before Sterling, who was brought up in Wembley, took centre stage with two more in the last 10 minutes to become the first player to score an FA Cup final hat-trick since Stan Mortensen in 1953 when Blackpool beat Bolton 4-3 in the «Matthews Final».
«I grew up here and saw this stadium get built. It’s a massive dream come true to win trophies here,» Sterling said.
«It shows what the manager is building here. He said we needed to get the mentality right and we did that and did it exceptionally well.»
Other than one early chance for Roberto Pereyra, Watford never looked remotely capable of ending their 30-year winless run against City in their second appearance in the final, having lost to Everton in 1984.
It always looked a long shot for them to deliver a classic Cup upset. City had beaten Watford in the teams’ last 10 meetings, scoring 32 goals in the process and conceding six while Watford’s last win in the fixture came in 1989 in the old Second Division.
The underdogs did have the first clear chance after 11 minutes when Gerard Deulofeu broke and set up Pereyra on the edge of the box but Ederson flew off his line to save with his foot.
Other than that, they spent most of the first half camped deep in their own half and there was an air of inevitability when City struck after 26 minutes as diminutive duo Silva and Sterling won headers against big Watford defenders, allowing Silva to seize on the loose ball and fire past Heurelho Gomes.
They doubled the lead in the 38th minute when Bernardo Silva chipped a perfectly-weighted diagonal ball beyond the flailing Gomes for Jesus, starting ahead of Sergio Aguero, to steer back goalwards and almost over the line before Sterling lashed it into the net.
Watford had trailed Wolves 2-0 in the semi-final before coming back to win 3-2 in extra-time and though they started the second half with more attacking intent, hope was extinguished when City broke at pace, Sterling rolling the ball to De Bruyne who dummied past Gomes before drilling the ball low into the net.
Watford, too late, threw men forward and were exposed when Jesus broke from his own half to tuck the ball under Gomes to make it 4-0 and Bernardo Silva was the provider again as Sterling arrived at the back post to smash in the fifth.
It was a good result for Wolverhampton Wanderers too as they will now qualify for the Europa league via their seventh-place finish in the Premier League.