Southern Miss (8-2) led for much of the second half but Ole Miss' Terrance Henry tied the game at 76 on a pair of free throws with 1:53 remaining. Watson responded with a 3-pointer to give the Golden Eagles a 79-76 lead and Torye Pelham added an emphatic one-handed jam on the next possession to seal the victory.
Southern Miss shot 49.2 percent from the field (30 of 61), including 53.3 percent (8 of 15) from 3-point range.
It was the teams' first meeting in Hattiesburg since 1994. The loss snapped Ole Miss' six-game winning streak.
Ole Miss took a 34-33 lead into halftime on Murphy Holloway's 15-footer at the buzzer.
Neither team could get much of an advantage until midway through the second half, when Southern Miss used an 8-0 run to push ahead 60-55 with 9:29 remaining. The Rebels fought back but couldn't get the win in front of a raucous Southern Miss crowd that got an unexpected treat: The football team's quarterback Austin Davis proposed to his girlfriend at halftime.
Southern Miss lost much of its roster from last season's team that finished with a 22-10 record, but coach Larry Eustachy has restocked quickly. Holdovers Johnson, LaShay Page and Maurice Bolden provide a solid nucleus, while newcomers like Watson and Jonathan Mills have filled out the roster with quality players.
Johnson made 8 of 13 shots from the field, including 3 of 4 from 3-point range. The senior played despite a staph infection on the side of his face and neck that was covered by a large bandage. Watson scored 12 of his 18 points in the second half and also added 11 assists.
Ole Miss lost despite one of its better shooting games this season. The Rebels made 45.2 percent (28 of 62) of their shots from the field and outrebounded the Golden Eagles 39-33.
Reggie Buckner scored 10 points, grabbed 16 rebounds and blocked four shots, giving the 6-foot-8 junior the school's career blocks record with 183.
Ole Miss' Jelan Kendrick -- a former McDonald's All-American -- saw his first career action but didn't score in eight minutes off the bench.
The 6-7 redshirt freshman's role is expected to expand as Southeastern Conference play approaches. He's undeniably talented, with long arms, a deft shooting touch and the ability to play both guard positions, but has struggled to find a college home.
He started at Memphis but left the program before playing a game after repeated disagreements with coach Josh Pastner. Then he transferred to Ole Miss, where he had to sit out a season because of NCAA rules. He was expected to play for the first time against Louisiana-Lafayette on Wednesday, but didn't dress out because of what Kennedy called a "coach's decision."