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.
Their return of 1.4 (10) was Fremantle's lowest half-time 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 to make their first grand final since 2013.
Sicily (26 disposals, 579m gained), 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.
The Dockers won the inside-50m count 57-51, but managed just five goals for the match.
"We ended up having 57 inside-50s for 40 points. It's not us,'' Fremantle coach Justin Longmuir said.
"And we had (25) inside-50s in the first half for a goal. We didn't really function as a forward line that well, but I thought Hawthorn's backs were terrific.
"They were able to work our forwards under the ball a lot. They were able to intercept."
Hawks veteran Jack Gunston kicked two clutch goals in the first-half onslaught, while midfielder Will Day finished with 24 disposals and eight clearances in his maiden finals appearance.
Watson was a human highlights reel at times on the way to two goals from 19 disposals, to go with two goal assists.
Jordan Clark was big for Fremantle with a game-high 38 disposals and a spectacular second-quarter mark, but he lacked support.
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 majors 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.
Fremantle trailed by 33 points at halftime, despite there not being anything obvious in the 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.
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.
"We know the Dockers' ... second halves have been phenomenal," Hawthorn coach Sam Mitchell said.
"At halftime we had a really good debrief, all the lines were very aligned on what we needed to do and there was a level of commitment knowing what was needed.
"I'd be lying if I said I wasn't a bit nervous when they kicked the first goal straight from centre bounce (to start the third quarter).
"The noise was phenomenal. I'm sitting in a closed glass box and I still couldn't hear through the phone.
"For our players to respond after that and then get the next one ... I think halving the third quarter was just absolutely vital to be able to put the game away."
