The 22-year-old became the first British player in 32 years to reach the last four at Eastbourne last week while she effortlessly disposed Croatia's Ajla Tomljanovic in the first round at SW19.
But in Kerber - a finalist at Eastbourne and seeded number nine - Watson faced a much tougher proposition.
An opening game break of serve was hardly what she would have been aiming for pre match, and despite hitting back immediately, the British number one then conceded the first set 6-2.
The second set was a much closer affair though, and having traded breaks at 4-4, Watson got the crucial second break at the third time of asking to take the set 7-5 and level the match.
But Watson's serve again came back to haunt her, losing the opening game before a rejuvenated Kerber rattled off the next two games for a 3-0 lead.
The Brit did hit back with a break of her own, but with Kerber replying in kind straight away, the German was left to complete the victory.
- Sports & Recreation
- Naomi Broady