The Argentina international struck again four minutes later, tapping in after Watford goalkeeper Heurelho Gomes failed to hold David Silva's shot.
Having notched his fifth goal of the season, Aguero turned provider in the 38th minute, slipping in Gabriel Jesus to finish past a hapless Gomes.
It was City's 12th goal in week that included a 5-0 thrashing of Liverpool on 9 September and a 4-0 win at Feyenoord in the Uefa Champions League four days later.
With a 3-0 lead at the pause, City were in cruise control and defender Nicolas Otamendi added to the tally when he headed home Silva's cross in the 63rd minute. Aguero completed his 10th three goal haul for City nine minutes from time.
Raheem Sterling added the gloss from the penalty spot in the dying seconds.
"It was so good especially after an away game in the Champions League,” said Guardiola after the rout. “The way we played as a team, we are so happy. I was lucky to manage Barcelona with many outstanding performances but this week there have been a lot of goals. We have found our game."
Elsewhere, Tottenham Hotspur drew 0-0 at home with Swansea City and Liverpool were also held at home. Burnley, victors at champions Chelsea on the opening day of the season, and later securing a 1-1 draw away at Tottenham, gained another unexpected point with a 1-1 draw at Anfield.
Scott Arfield put Burnley in front in the 27th minute. Liverpool drew level three minutes later through Mohamed Salah's cool finish from Emre Can's pass.
"I'm not happy,” said Liverpool manager Jurgen Klopp. “I'm angry with the result but pleased with the performance. It's our fault. We were dominant but only scored one goal."
The Merseysiders are eighth after the stalemate. However promoted Newcastle United are on the rise. They continued their vibrant start to the season with their third win on the trot to go fourth.
Rafael Benitez's side took the lead when Ghana international Christian Atsu scored his first goal in the Premier League in the 19th minute.
Xherdan Shaqiri cancelled out the opener with an impressive strike, curling home after a forceful run in the 57th minute.
But Newcastle skipper Jamaal Lascelles, who bagged the winner at Swansea City last weekend, was again the Tyneside hero. He headed in the decisive goal with just over 20 minutes remaining.