Watson lived up to his billing as one of the most sought-after players in the auction, being sold to Royal Challengers Bangalore for 95 million rupees ($1.4 million).
The 34-year-old Aussie, who remains one of the top players in limited overs cricket, was sold for more than four times his reserve price despite nearing the end of his international career.
“Incredibly excited to join (RCB). Can’t wait to meet up with my new team-mates in April,” Watson tweeted.
Watson played for Rajasthan Royals last season, but together with Chennai Super Kings they have been banned for two years following a corruption scandal.
Their places have been filled by the Gujarat Lions, based in the western city of Rajkot, and Rising Pune Supergiants.
The new teams were allowed to choose five stars from each of the banned sides, while the rest were released into a pool for auction.
India’s Yuvraj Singh was sold on Saturday to Sunrisers Hyderabad for $1.03 million, a far cry from his best-ever price of $2.3 million.
The IPL, boasting an enviable brand value with Bollywood stars and major conglomerates as investors, has recently been dogged by corruption allegations.
Last July, a panel set up by India’s top court recommended suspending the Rajasthan and Chennai franchises over an illegal betting and spot-fixing scandal.
The ninth edition of the eight-team contest will be played across various cities from April 9 to May 29.