Along with Cameron White (62), Watson rebuilt Australia’s innings from 6-2 to take them past their target of 201. White perished to Kyle Mills (3-27) while Watson finished on 105 not out.
Off-spinner Nathan Hauritz (3-37) had earlier restricted New Zealand to 200-9, with Martin Guptill (40) top-scoring in a poor batting display.
Although a fiery opening new-ball spell from Mills and Shane Bond had given the Black Caps fresh impetus with two quick wickets inside three overs, Watson and White batted with intelligence and composure to ensure the world champions leave South Africa as the world’s best one-day side in the world.
Bond removed opener Tim Paine, caught at first slip by Ross Taylor in the second over, before Mills snared the key wicket of tournament top scorer Ricky Ponting, trapped lbw in the following over.
Bereft of scoring opportunities, Australia managed just 18 from the 10-over mandatory powerplay, the lowest total in the entire two-week tournament, surpassing New Zealand’s modest 22 a few hours earlier.
However, fresh from an unbeaten 136 against England on Friday, Watson greeted the arrival of New Zealand’s second-string seam attack with disdain, dispatching anything short and wide for four.
Although White succumbed to Mills – the second of his three dismissals – for 62, Watson continued his sensational form, smashing two successive sixes off Jeetan Patel to bring up his fourth one-day hundred as well guide Australia to victory with 28 deliveries to spare.
New Zealand’s task was made the more difficult when captain Daniel Vettori – one of the stand-out candidates for Player of the Tournament – was forced to withdraw before the match because of a hamstring problem.
With off-spinner Jeetan Patel the only change from the team which beat Pakistan in the semi-final, stand-in skipper Brendon McCullum elected to bat on an energetic – if unpredictable – Centurion wicket.
Rampant after their nine-wicket annihilation of England on Friday, Australia once again named an unchanged XI, with new-ball pair Brett Lee and Peter Siddle instantly extracting pace and sharp bounce from the wicket.
And it was Siddle who made the initial breakthrough, snaring a top edge from a wild McCullum slash outside outside off stump and into the gloves of Paine in the fourth over.
Neither Aaron Redmond or new batsman Guptill could penetrate the vice-like grip as New Zealand limped to 22-1 at the 10-over powerplay.
The run-famine relented with the introduction of second-change bowlers Mitchell Johnson and Watson, with Guptill in particular punishing anything full and outside off stump.
But with New Zealand slowly wresting the momentum in their favour, Redmond recklessly conceded his wicket charging a wide Hauritz delivery in the 19th over, with Paine whipping off the bails in an instant.
The off-spinner landed his second wicket when Guptill returned a simple catch in the 23rd over, ending his promising innings of 40, before Taylor was brilliantly caught by Mike Hussey at backward point off Johnson in the following over to leave New Zealand teetering at 81-4.
Consolidation arrived in the form of Neil Broom and James Franklin, with the pair compiling a patient 65-run stand in 14 overs.
But just after taking the batting powerplay in the 39th over, calamitous running saw Broom gift his wicket to Australia for 37 shortly after a series of confident boundaries.
Franklin departed for 33 in the 41st over as Lee speared a vicious yorker at the left-hander’s toe from around the wicket, uprooting the off stump in the process.
Ian Butler became Hauritz’s third wicket, trapped lbw, before Patel and Bond took the Black Caps beyond the 200-run mark with a boundary from the final ball of the innings.
But despite their electric start with the ball, Kiwi skipper McCullum was left to lament a dropped catch when White was on 14.
The Victoria captain top-edged an attempted pull of Ian Butler high in the air, but the wicketkeeper failed to cling on to a tough chance running backwards towards fine leg.
New Zealand’s support seamers could not find the same disciplined lines as Mills and Bond, with Watson, in particular, capitalising as Butler and Franklin dropped short, while off-spinner Patel was lofted with a slog-swept six over mid-wicket.
The Queenslander brought up his 10th one-day 50 from 74 deliveries in the 26th over, although he was fortunate to survive a very confident appeal for leg before against Franklin soon after.
White brought up his half century with a punchy straight drive for four over Butler’s head, but his innings came to an abrupt end when he played on to his stumps attempting to shoulder arms to a Mills delivery in the 35th over.
Hussey soon followed, cutting Kyle Mills to point, but Watson took Australia past their winning target in emphatic style to ignite a celebratory pyrotechnic display high in the Centurion night sky.