It is named for Oliver Watson, the president of a bank in nearby Williamsport at the time.

At the time central Pennsylvania and the city of Williamsport were at the center of the lumber industry in the United States.

Trees were cut down and floated down Pine Creek, which flows through Watson Township.

Other early attempts at industry included an iron forge along Furnace Run.

Pennsylvania Route 44 crosses the center of the township, following Pine Creek and passing through the unincorporated communities of Torbert and Tombs Run.

PA-44 leads south to Jersey Shore and northwest 65 miles (105 km) to Coudersport.

The racial makeup of the township was 98.73% White, 0.18% African American, and 1.09% from two or more races.