Smashing the second-ever hundred in an IPL final, Watson notched up 117 runs, hitting massive 8 maximums and 11 fours in his 57-ball innings.
Defending 179, Sunrisers kept tight reins on the Super Kings batsmen initially while also taking a crucial wicket of Faf du Plessis. The first four overs saw Chennai mustering just 16 runs.
Watson failed to open his account in the first 10 balls of the innings, but there was no looking back once he got into the groove.
The former Aussie international stitched a sensational 117-run stand with Suresh Raina(32 off 24) for the third wicket to take the most successful franchise in the IPL history closer to another title.
Raina scored a breezy 32, inclusive of 3 fours and 1 six in his 24-ball innings.
Raina, however, could stick till the end as he was sent packing by Carlos Brathwaite, making way for Ambati Rayudu.
Rayudu, who hit the winning runs, played supporting role as Watson did the talking with the willow. The former Mumbai Indians batsman accumulated 16 runs off 19 balls.
Bhunveshwar Kumar was the most economical bowler for Sunrisers Hyderad, leaking just 17 runs in 4 overs.
Sandeep Sharma and Carlos Brathwaite clinched one wicket each for the Hyderabad based outfit.
Earlier, blistering knocks from skipper Kane Williamson (47 off 36) and Yusuf Pathan (45 off 25) propelled Sunrisers Hyderabad to a challenging 178/6 against Chennai Super Kings in the grand finale of the 11th edition of the Indian Premier League at the Wankhede stadium in Mumbai.
Put in to bat, Sunrisers found themselves under severe pressure after opener Shreevats Goswami dismissal quite early in the innings. A brilliant maiden over from Lungi Ngidi restricted Sunrisers to 17-1 in first four over but Kane Williamson and Shikhar Dhawan (26 off 25) joined hands in the middle and added crucial 51 runs for the first wicket.
Dhawan, who was determined to make an impact in the final, struggled to play against the Chennai bowlers and was offloaded by Rajendra Jadeja in the 9th over after missing a heave.
Williamson, on the other hand, kept the scoreboard ticking and made sure he cleared the fence frequently. The Kiwi international was well supported on the other end by veteran Indian Yusuf Pathan.
Williamson laced his innings with 5 fours and 2 maximums while Pathan sent the ball sailing over the ropes twice and touched the fence on four occasions.
Bangladesh all-rounder Shakib Al Hasan played a crucial 15-ball 23-run knock to help Sunrisers Hyderabad post a competitive total.