British No 1 Watson agonisingly let two match points slip against modern-day titan Williams, allowing the 20-time grand slam champion off the hook.
Top seed Williams triumphed 6-2 4-6 7-5 to set up a last-16 clash with older sister Venus and keep her calendar grand slam bid on track.
Watson served for the match only for Williams to sneak home, leaving the 23-year-old Briton to admit she will replay one mis-hit backhand endlessly in her mind.
“Well I hope so,” said Watson when asked if she would beat Williams in a rematch.
“I know I can beat her and that’s what I’ve learned about myself.
“I know how I would play. Even now I wish I could go back and play one point differently, to maybe try to change things.
“At deuce when I was serving for it, I would have smacked that backhand super-hard if I could go back, rather than just making it.
“It wasn’t to be today. But I wouldn’t be playing if I didn’t think I could beat the best in the world.
“I think it was a huge opportunity for me, not just before the match but during the match towards the end.
“It’s either super-high if you win or quite low if you lose; because she’s the best in the world that would have been a great achievement for me.”
Former Wimbledon champion Andy Murray took to social media to acclaim Watson’s heroic defeat, while Williams herself admitted her opponent “should have won the match”.
Two-time grand slam winner Murray posted on social media: “Retweet if @HeatherWatson92 just made you feel really effing proud! Favourite if she made you feel really effing proud!”
Guernsey native Watson hoped the British public appreciated her grit and tenacity, even despite huge dejection in defeat.
“I hope so,” said Watson when asked if she felt she had made the nation proud. “It would have been a lot better if I’d won.
“I hope I did, I hope I showed I fought for them.
“And I hope I showed it’s not going to be a walk in the park for anyone that plays me.”
Williams raced into a one-set lead in just 25 minutes, raising fears of an cakewalk.
Watson reignited the battling qualities that allowed her to save match point in a three-set first-round victory over France’s Caroline Garcia, however, to claim the second set and level the match.
The world No 59 backed Williams into a corner, and the 33-year-old’s standard duly dipped.
Where Williams had been burying winners, in the second and third sets she was wayward and increasingly tetchy.
Watson stole a double-break at the start of the third set, but could not retain command.
Williams converted her sixth break point of the final set’s fourth game, and clawed her way back thereafter.
Not even Williams’s form for dramatic antics could ease Watson’s spectacular frustrations in defeat. At Roland Garros, Williams overturned a one-set deficit on four occasions en route to that 20th grand slam crown. An almost-tearful Williams left Centre Court perplexed at her victory, admitting Watson “should have won the match”.
“She was playing so good there was nothing I could do,” said Williams.
“She played unbelievable and really I think she should have won the match. She really gave her all.”
Williams stalks the world’s top tennis courts, winning as many matches through ability as intimidation.
The women’s game’s outstanding star ran the card of her muscle-flexing tricks in a bid to ruffle Watson’s feathers, even starting to let out one war cry before she had buried the eventual winner.
Watson remained unfazed amid the maelstrom, insisting afterwards: “I didn’t see her, I just saw an opponent in the way of me and my goals.”
Williams tipped Watson to chase far higher goals than cracking the world’s top 20 – for now the British No 1 will just continue to eye her season goal of the top 25.
“I’ve learned that I can compete with the best in the world and I can play really good tennis,” said Watson.
“I just need to use this to motivate myself for the future, and to know I can be there and I can be at the top of the game.
“I make mini goals for myself, and as I achieve them then set them higher.
“My goal for this year is still the top 25.”
Wimbledon: Page 3