With the hosts 3-0 up in the series, Alastair Cook will lift the urn at the end of the match regardless of the result, but Watson's dominant 176 on day one saw his side to 307 for four and places them well to chase a first victory of a miserable summer.
Batting at number three, his fourth different position this summer, Watson ended a century drought totalling 48 innings and almost three years before being superbly caught by Kevin Pietersen just before stumps.
Watson recovered from a nasty blow by Stuart Broad to ease past his previous best of 126, hitting 25 fours and a six along the way.
But England, who so rarely deviate from their plan, will have been disappointed by their first sight of Warwickshire all-rounder Chris Woakes and Lancashire slow left-armer Simon Kerrigan.
Their inclusion in place of the injured Tim Bresnan and the dropped Jonny Bairstow raised eyebrows before play, with Chris Tremlett and Steven Finn considered much likelier picks, and even more so afterwards.
The duo turned in combined figures of nought for 105 in 23 overs with Kerrigan in particular suffering from a chronic case of stage fright.
In changing the balance of their side, England called on a second spinner on home turf for the first time since the opening Test of the 2009 Ashes. It may be even longer before they do so again.
James Anderson's two wickets were the counterpoint, taking him to 326 Test scalps - ahead of Bob Willis and behind only Sir Ian Botham on England's all-time list.
After an hour the game was evenly poised at 37 for one, England perhaps marginally happier having dismissed David Warner for six.
Anderson was the bowler, pushing one across the left-hander and picking up the edge to gift Matt Prior a regulation catch.
That brought Anderson level with Willis and he must have fancied an early sight of Watson, whose tendency to fall lbw has been a feature of the series.
Anderson rapped him on the pads when he had just eight, but umpire Aleem Dar favoured the batsman in a tight call.
But the game changed swiftly after the drinks break, with Watson's natural aggression easily trumping the inexperience of England's newcomers.
Woakes managed one maiden in his opening burst but otherwise served up too many loose balls as his other four overs cost 30, mainly to Watson.
He also lifted Graeme Swann for a mighty straight six, perhaps a sign that the time was not ripe to introduce Kerrigan.
But Cook tossed the 24-year-old the ball moments later and the result was dispiriting.
Watson instantly went on the attack, flaying Kerrigan for six boundaries in two overs that cost a total of 28.
It was poor from Kerrigan, who offered up one full toss and a handful of inviting long hops.
A pre-lunch century briefly looked possible until Broad returned to restore some control.
At the interval Watson had 80 of Australia's 112 for one, with Chris Rogers sedate on 21.
He added two more in the afternoon before his nemesis, Swann, sent him back via a smart slip catch by Jonathan Trott.
Broad followed with a fierce spell of short bowling from the Vauxhall End, almost castling captain Michael Clarke off his arm guard and then striking Watson violently between neck and jaw.
The Australian spent several minutes regaining his composure but was fit to continue on 91.
Clarke never looked content at the crease and had scraped together seven when Anderson brought one back in to him, uprooting off stump having flicked the front pad.
Watson did not allow that to distract him and reached three figures with a clip for three.
His elation would have been short lived had Cook held a simple catch off Anderson with the opener on 104, but the skipper grassed it.
Kerrigan was given one over before tea, but a looping beamer at Steve Smith suggested the nerves had yet to dissipate.
The first hour of the evening session confirmed Australia's position of strength, with 57 runs in 16 overs.
Watson cruised past 150 in that time, with Smith finding his feet too following a frenetic but unconvincining start.
Woakes and Kerrigan drifted in and out as Cook attempted to keep them involved and the former thought he had Watson lbw late in the day only to see the decision overturned by DRS.
Watson's demise came three overs before the end of play, Broad enticing a full-blooded hook and Pietersen diving low to hold a remarkable catch in the deep.