Wide receiver DeAndre Hopkins recorded his first 100-yard receiving game this season, finishing with 10 catches for 107 yards and a touchdown. Mariota, who became the first Titans quarterback with two rushing touchdowns in a game since Steve McNair in 2003, injured his hamstring and didn't play after halftime.
Watson had shown steady improvement since he replaced Tom Savage in the second half in the Texans' season-opening loss to the Jacksonville Jaguars, but he took a huge leap with his record-setting performance on Sunday.
Jadeveon Clowney sacked Cassel and forced a fumble later in the fourth quarter which the Texans recovered.
The first score came on a 2-yard run by Lamar Miller.
While the defense forced a three-and-out on back-to-back consecutive drives, Houston's offense capitalized. Watson has thrown for 528 yards and three touchdowns with three interceptions while rushing for 124 yards and a score. Marcus Mariota has thrown for 696 yards and three touchdowns while also running for 77 yards. The Titans trailed 21-7 with 11:44 left in the second quarter.
Churchill medallist Billy Slater and Cooper Cronk coy on NRL futures
But they were both on the field at ANZ Stadium this weekend to orchestrate a comprehensive 34-6 triumph over the 2015 premiers. A win would be the icing on Smith's flawless season that already includes an Origin series win and Dally M triumph.
Rookie Dylan Cole added to the lead when he returned an interception 25 yards for a touchdown with about nine minutes remaining. A defensive pass interference call, Adoree Jackson covering Will Fuller in the endzone, gave Houston possession at the one-yard line.
ABOUT THE TITANS (2-1): Tennessee seems poised to take control of the division with an offense ranked fifth in total yards and sixth in scoring, averaging 28.7 points following last week's 33-27 victory over Seattle.
Deshaun Watson celebrates after a touchdown on Sunday. Both Fuller and Miller caught touchdown passes from the rookie quarterback. Another Fairbairn field goal accounted for the final margin.
The Titans posted a record of 2-4 against AFC South rivals and they lost twice to the Texans, a big reason why they finished second in the division in 2016.