Australian coach Mickey Arthur and team manager Gavin Dovey made the stunning announcement on Monday that Watson, Pattinson and Johnson and as well batsman Usman Khawaja had been dropped for disciplinary reasons.
Arthur declared that the four players, including Test veterans Watson and Johnson, failed to deliver a presentation after Australia's embarrassing Second Test defeat last week.
All players in the Australian team were required to give a presentation after the loss, which left the Aussies languishing at 0-2 in the four-match Test series in India.
"This is a line in the sand," Arthur said of the axings.
The Aussie players were given a deadline to give feedback on how the team can improve after the horror innings and 135 run-thrashing in Hyderabad, as well as the eight-wicket loss in the First Test at Chennai.
Watson, Khawaja, Johnson and Pattinson did not meet the deadline and won't be considered for selection in the Third Test, which Australia must win to even have a chance of taking the series to a draw.
Arthur said he had heard that Watson and Pattinson had planned to talk with him about the "homework" on Monday, while Khawaja and Johnson had clean forgot.
"I asked the players at the end of the (Second Test) game to give me an individual presentation," Arthur said.
"I wanted three points from each of them technically, mentally and the team as to how we were going to get back over the next couple of games - how we were going to get ourselves back into the series.
"Those four players unfortunately did not meet my requirements so those four are not available for selection for this Test match.
"Although this incident might seem very small in isolation this is a line-in-the-sand moment for us as a unit in our quest to become the best in the world.
"This has been the toughest decision that myself, manager Gavin Dovey and captain Michael Clarke have ever had to make.
"But the ramifications for that within our teams structure and the message that it sends to all involved in Australian cricket is that we are pretty serious about where we want to take this team."
Arthur said he regretted the fact that the team's vice-captain had to be dropped, but declared the decision was about making a stand.
"I wish it wasn't the vice-captain. I wish it wasn't Shane Watson," Arthur said.
"But this was a moment where we had to make a statement irrespective of who the players were."