At stumps on Wednesday's first day, Australia were 307 for four as they sought a consolation victory in a five-match series already won by England at 3-0 up.
Watson put a disappointing series with the bat behind him with just his third Test hundred -- his first in 25 matches and 48 innings since his previous best of 126 against India at Mohali in October 2010.
The 32-year-old all-rounder, playing his 46th Test, was especially severe on debutants Chris Woakes (none for 52 in 15 overs) and left-arm spinner Simon Kerrigan (none for 53 in eight), chosen after England opted against recalling fast bowler Chris Tremlett on his Surrey home ground.
"A century is something I have searched for for a long time," Watson, hit on the head by a Stuart Broad bouncer on 91, told BBC Radio's Test Match Special.
"Getting hit on the head helped me because it took my mind off getting through the nineties.
"I faced Simon Kerrigan in the tour match at Northampton (against the second-string England Lions) last week and I knew what to expect."
Watson, filling Australia's problem position of number three after starting the series as an opener and then moving to number six, received good support from Steven Smith (66 not out) in an a fourth-wicket stand of 145.
Nightwatchman Peter Siddle was unbeaten on 18.
Michael Clarke, trying to avoid becoming the first Australia captain to lose a Test series in England 4-0, unsurprisingly chose to bat first after winning the toss on a good pitch.
However, England had an early breakthrough when David Warner played a loose shot outside off-stump to James Anderson and was caught behind for six.
But with England's bowlers failing to gain much movement, Watson, hitting through the line with confidence, was 80 not out at lunch.
Chris Rogers, who helped Watson add 107, then fell for 23 when he edged off-spinner Graeme Swann to Jonathan Trott at slip.
Watson, nine runs shy of a century, was struck on the side of his head unprotected by his helmet, after he took his eye off a Broad bouncer.
Anderson then captured the prize wicket of Clarke, bowled off the pad for seven, with the Lancashire paceman's 326th Test wicket moving him past Bob Willis and into sole possession of second place on England's all-time list of leading Test wicket-takers behind Ian Botham (383).
Watson, who batted on after his painful blow, spent 41 minutes in the 90s before driving Anderson to complete a hundred in a mere 114 balls.
However, he should have been out on 104 when he edged Anderson only for England captain Alastair Cook to drop a seemingly simple catch at first slip.
Kerrigan's difficult day continued when he was called for a no-ball as a result of a dangerous head-high full-toss smashed to the boundary by Smith, who went on to make a 113-ball 50 featuring five fours and a six.
Late on, Woakes thought he had a maiden Test wicket when Watson missed an attempted pull and was given out lbw on 166.
But Watson challenged Kumar Dharmasena's call and, after the Decision Review System indicated the ball would have cleared the stumps, the Sri Lankan umpire reversed his original verdict.
"I thought the lbw decision was going to be umpire's call when I reviewed it, but I'm not a good umpire -- I usually get it wrong," Watson said.
Watson was out when a powerful hook off a Broad bouncer was brilliantly caught by Kevin Pietersen, running round at deep backward square leg, to end a near six-hour innings of 247 balls with 25 fours and a six.
Both teams made changes following England's 74-run fourth Test win at Chester-le-Street, with the hosts missing injured all-rounder Tim Bresnan and dropping out-of-form batsman Jonny Bairstow.
Australia, looking for their first win in nine Tests, gave a debut to all-rounder James Faulkner and recalled Mitchell Starc after they dropped batsman Usman Khawaja and paceman Jackson Bird.