Defending champion Manchester City, which started the day in second position, suffered its second surprise loss in four days when it was beaten at Leicester 2-1.
While Vardy's lone goal saw Leicester hand Chelsea their first home defeat this season, Hodgson's Palace stunned Pep's City 3-2 to end their 100 per cent home record.
The game finished 1-1 in regulation time, with Kevin De Bruyne marking the first start of his latest comeback from injury with the opening goal.
N'Golo Kante and David Luiz scored for Chelsea as they beat Manchester City 2-0 at Stamford Bridge
The changes in personnel had little effect on Guardiola's well-oiled machine, and only the brilliance of Watford goalkeeper Ben Foster ensured City didn't head into the interval with more than a one-goal advantage.
Manchester United came from two goals behind to draw versus Southampton while Manchester City beat Bournemouth 3-1.
Other than them, AS Roma and Ajax also reached the round-of-16 of the Champions League on Tuesday.
Manchester United players were booed off the field at Old Trafford after their 0-0 draw vs Crystal Palace while Tottenham Hotspur beat Chelsea 3-1 to end their unbeaten run in Premier League.
The leaks emails claimed to show in 2015 how the Etihad deal generated 67.5 million pounds annually for Manchester City which is owned by Sheikh Mansour, a member of Abu Dhabi's royal family and deputy prime minister of the United Arab Emirates.
Completely outplayed by English football's dominant force, Mourinho has little prospect of dethroning City as champions.
For the first time in 130 years of the English top flight, three teams are unbeaten after 12 games. Liverpool remains two points behind City after beating Fulham 2-0 on Sunday and Chelsea is two points further back after being held 0-0 by Everton.
The contract extension is a reward for the fine form he has shown since the start of City's record-breaking campaign last season.
Their wins nicely set up a Manchester derby game in the Premier League on Sunday.
Since Man City was bought with Abu Dhabi sovereign wealth in 2008, a team long in the shadows of more glamorous Manchester United has overtaken its rival on the field.
De Bruyne, who has only just returned from two months out with ligament damage in his right knee, now has the same problem in his left knee.
Mahrez said it had been "difficult to sleep" since the tragedy that has sparked an outpouring of grief in English soccer and beyond, but added that he always wanted to play in the match.
The defeat against Juventus leaves United with just one win from its last seven games as Mourinho's men struggle to make much headway on the roads or on the field.
After an exciting and thrilling weekend, this is how the English Premier League table stands after Matchday 8.
Manchester City could not break the Anfield jinx despite being handed a penalty in the dying minutes, only for Maharez to miss the target. Chelsea, Liverpool and City have 20 points each.
The Spanish forward struck from a narrow-angle with three minutes remaining after pouncing on a loose ball ahead of 21-year-old defender Stefan Posch.
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