In the biggest shock in the showpiece match since Wimbledon's 'crazy gang' upset Liverpool 1-0 in 1988, midfielder Watson secured Wigan a thoroughly deserved win over the multi-millionaire performers of City as Roberto Mancini's side ended the season without a trophy.
It came 12 months after their rousing Premier League success in the death throes of last season when Sergio Aguero's winning goal against QPR handed them the title. This outcome was every bit as miraculous with Pablo Zabaleta rightly red carded.
The performance and attitude of some of the City players must place huge question marks over the future of Mancini in his job. It was a slipshod performance from a side that started the match 4/11 hot favourites against a Wigan team priced at 9/1.
Shaun Maloney swept in a corner at a sodden national stadium and Watson - back in action after several months out with a broken shinbone - rose to power a header high into the net that left England goalkeeper Joe Hart with no chance.
In truth, City can have few complaints about this result. They looked disjointed for large swathes of the match as Wigan carried off their first FA Cup in a first appearance in the final.
Zabaleta became only the third player to be sent off in an FA Cup final when he clattered the excellent Callum McManaman with a late sliding challenge on 82 minutes after the sloppy Gareth Barry had needlessly lost possession with an impoverished pass.
It was a second booking for Zabaleta after he had taken out McManaman on 61 minutes, but one that could easily have earned him a straight red card.
Roberto Martinez's team dominated the final 10 minutes and made their one-man advantage count in the first minute of three added on as Watson rose highest to convert eight minutes after he had replaced Jordi Gomez.
There was barely time for City to reply as Wigan dropped deep to defend with the same sort of effect they had managed for most of the afternoon.
The rain tumbled down over London to reflect the grim mood among the City camp at the full-time whistle.
Wigan will be on soft drinks tonight to celebrate with their crucial visit to Arsenal looming large at the Emirates Stadium on Tuesday night.
They could yet end the season winning the FA Cup and suffering the ignominy of relegation from the Premier League.
Depending on results in the Premier League on Sunday, Wigan need at least a point from Arsenal before hosting Aston Villa in their final game of the season at the DW Stadium next Sunday.
But at least they will have the boost of being FA Cup holders, a feat that always seemed possible with City never gaining control of the contest as many commentators had predicted.
They can also look forward to competing in the Europa League having conceded just two goals in seven FA Cup games this season.
Rovers lost 3-0 and Whelan's career was finished, but this provided an altogether different outcome for Whelan, 76, in a watching capacity.
Mancini was quick to rubbish reports afterwards that he will be replaced by Malaga coach Manuel Pellegrini during the close season.
Carlos Tevez forced Wigan goalkeeper Joel Robles to somehow nudge a shot over the bar with a leg on 28 minutes, but Wigan were every bit as sprightly in the first period.
McManaman burst into the City box, but saw a shot blocked by an opposition player after Hart had come off his line and failed to collect the ball.
Zabaleta was fortunate to avoid the concession of a penalty moments earlier when he clearly felled Roger Espinoza in his box, but referee Andre Marriner decided to wave play on.
Maloney knocked a free-kick off the top of the bar in attempting a cross from out wide as the match raged towards a conclusion, but Wigan won the match with their first attempt on goal of the afternoon.
Unlike Maloney's free-kick, there was nothing fortunate about the day's somewhat seismic happenings.
MAN OF THE MATCH
Callum McManaman (Wigan) - An outstanding performance from the youngster, whose pace and trickery prompted Pablo Zabaleta's sending off eight minutes from time. Overshadowed City players with his desire and hunger.
MATCHCAST: FULL COMMENTARY AND MATCH STATS