The Hawks kicked six goals to one in a dominant first half in Thursday night's clash to set up the 10.12 (72) to 5.10 (40) win and secure a home preliminary final.
Fremantle, who had been a perfect 12-0 at Optus Stadium this season, will now confront either Carlton or Geelong in a cut-throat semi-final in Perth next week.
The Dockers were a dominant force during the home-and-away season, stringing together a 14-game winning streak at one stage on the way to a league-best 19-4 record.
But the minor premiers looked overawed in the finals cauldron on Thursday night in front of 59,446 fans - Fremantle's largest ever home crowd.
Fremantle's first-half return of 1.4 (10) was their lowest such score in a final, even worse than the 1.6 (12) they kicked across the opening two quarters of their 2013 grand final loss to the Hawks.
The Dockers will now have to win their semi-final and then an away preliminary final in order to make their first grand final since 2013.
Sicily, Tom Barrass and Josh Battle were rocks in defence, keeping Jye Amiss, Josh Treacy and Patrick Voss to two goals and 19 disposals between the three of them.
Treacy's first kick of the game - a set-shot goal - only arrived with five minutes remaining in the match.
Hawks veteran Jack Gunston kicked two clutch goals in the first-half onslaught, while Dylan Moore chipped in with two majors.
Watson was a human highlights reel at times on the way to two goals from 19 disposals.
"The belief in the group's outstanding," Watson told Fox Sports after the match.
"We knew it was going to be hot. It was hot early, but the boys stood up well."
Fremantle ruckman Luke Jackson kicked the opening goal of the match, but the rest of the first half belonged to Hawthorn as their slick ball movement and fierce tackling left the Dockers looking second-rate at times.
Watson's soccered goal from nearly 20m out sparked a run of four consecutive goals as the Hawks took a surprise 28-9 lead into quarter-time.
Hawthorn's pressure continued to be off the charts in the second term.
And even when Fremantle hit back - like when Karl Worner won a holding-the-ball free kick for his chasing tackle on Max Beattie - the Hawks didn't give up.
When Worner played on and took a bounce from that free kick, Beattie ran hard to put pressure on the kick.
It resulted in a turnover and a running goal to Moore as Hawthorn's lead expanded to 33 points by half-time.
There wasn't anything obvious in the half-time stats to suggest what was going wrong for Fremantle.
But the naked eye could decipher their problem - an inability to handle Hawthorn's intense pressure.
Jordan Clark's high-flying mark on top of Jack Ginnivan was a rare highlight for Fremantle in the first half.
Hawthorn forward Mitch Lewis suffered a huge scare when he hurt his shoulder in a heavy landing, but he was able to return for the start of the second half.
Fremantle broke Hawthorn's run of six goals when Jye Amiss kicked truly one minute into the third quarter.
But luck wasn't on Fremantle's side, with Watson kicking his second to restore the 33-point margin at the final change after his direct opponent Brandon Walker had rolled his ankle in the previous play.
Watson put the icing on the cake early in the final quarter when he gathered the ball at full pace on the wing, handballed to himself while under pressure from Luke Ryan, before regathering to kick it to Harry Morrison for the sealing goal.
