The British number two was on the back foot throughout and lost 7-6 (7/2) 6-2 to her Estonian opponent in an hour and 32 minutes.
It was Watson's last chance to earn ranking points before the cut-off for the year's second grand slam in Paris next month.
The 24-year-old has slipped outside the top 100 and, with only 108 players earning direct entry into Roland Garros, Watson is likely to have to go through qualifying.
A good week in Monterrey last week, where she reached the quarter-finals, saw her climb to 110th but this was a missed opportunity against a player ranked only 11 places higher.
Next week Watson is due to represent Great Britain in their Fed Cup World Group II play-off against Romania in Constanta.
She received treatment to her left thigh late in the second set but was able to complete the match and captain Anne Keothavong will hope it is nothing serious.
Read the original article on Eurosport: Heather Watson suffers early exit in Switzerland to dent French Open chances