Less than three weeks out from the opening Test at the Gabba, Watson sustained the injury bowling as India racked up an enormous 6-383 in Bangalore on Saturday.
India's total was built around Rohit Sharma's astonishing 209, the second-highest individual ODI score of all time, as the home side secured a 3-2 series win.
Australia's gallant run chase was sparked by the most unlikely of centuries to James Faulkner and a 115-run 10th wicket partnership with Clint McKay (18).
The Australians were never realistically in the chase, despite explosive cameos from Glenn Maxwell (60 off 22) and Watson (49 off 22), until Faulkner reprised his Mohali heroics.
In that match he thumped 30 off one Ishant Sharma over in a match-winning 64 off 29.
On Saturday, he clubbed six sixes and 11 fours in a blistering 73-ball 116 but couldn't quite get his side across the line.
He reached three figures from just 57 balls, making it the fastest ODI century by an Australian - bettering Matt Hayden's 66-ball effort against South Africa in 2007.
But of great concern is the injury status Watson who pulled up in his delivery stride to begin his sixth over.
He gingerly walked back to his mark and attempted a stretch before succumbing to the injury.
He returned for a brutal batting cameo as Australia were bowled out for 326, but his availability for the Gabba Test is surely in doubt.
Selectors may be heartened that he was able to bat at all, but he was in obvious pain throughout his 22-ball innings.
Sharma's incredible 158-ball innings included 16 sixes and a dozen fours, and he was the beneficiary of a very costly drop by replacement fielder Moises Henriques when on 120.
He put on 112 for the opening wicket with Shikhar Dhawan (60) and a further 167 with MS Dhoni (62 off 38).
Dhoni, who hit one six out of the stadium, was also dropped - by Maxwell when on 29.
The pair helped India pile on a staggering 151 runs in the final ten overs as their total went from being simply imposing to being match-winning.
Xavier Doherty was the pick of the Australian bowlers, taking 2-74 while quicks Clint McKay (1-89) and Nathan Coulter-Nile (0-80) bore the bulk of the punishment.
On the other side, recalled paceman Vinay Kumar became just the fifth bowler, and the first Indian, to concede 100 runs in an ODI - finishing with 1-102 from nine overs.