Watson, with 125 votes, beat second-placed Micheal Clarke (90) by a good 35 votes to scalp the honour. Mitchell Johnson came third with 87 votes.
Since coming into the Test team in the third Test of the Ashes, Watson has averaged 57 with the bat, which is the highest of any Australian batsmen by some way.
He scored his maiden Test century against Pakistan in the Boxing Day Test against Pakistan last year. This was one of the catalysts in him driving home the honour.
Watson, who once upon a time struggled to find a place in the Australian squad, fought off injury threats to make a successful comeback on the international platform.
His good form in the ICC Champions Trophy and his Man of the series in India, last year, also helped him to the title of Australia's One-Day International Player of the Year.
Simon Katich was named Australia's Test Player of the Year after consistent performances through the year.