In a cruel blow, Watson will miss Sunday's decider against his former club Newcastle and become the first player to sit out a grand final as a result of a concussion.
Watson was dazed and was taken from the field moments after coming on in the Roosters' preliminary final win over the Dolphins.
Under the NRL's protocol, players diagnosed with a category-one concussion, as Watson was, face a mandatory stand-down period of 11 days.
The Roosters had indicated that Watson was testing well leading into Thursday when the 30-year-old met with an independent specialist.
But on Friday the club confirmed the utility had failed to receive clearance to line up in the grand final.
The outcome means Watson has played his last game for the Roosters with the popular utility heading to St George Illawarra next season before linking up with the PNG Chiefs in 2028.
Watson's absence likely forces Roosters coach Trent Robinson's hand when it comes to his bench, with hooker Benaiah Ioelu the most obvious man to come into Easts' 19-man squad.
Ioelu has played mostly off the bench through his 17-game NRL career and would act as cover for Reece Robson.
"I don't think it takes too much to work out what plan B is, but we have got some really good hookers," Robinson said on Thursday.
"Benaiah Ioelu played some great footy for us this year. He brings a lot of energy to us as well so he will come into consideration then."
Newcastle, meanwhile, are also expected to face a tough decision leading into Sunday's decider as they weigh up a replacement for suspended No. 9 Phoenix Crossland.
Harrison Graham has excelled as a bench option at hooker for the Knights, but coach Justin Holbrook, who doesn't have to name his final team until 90 minutes before kick-off on Sunday, has the option of also starting Thomas Cant or Diesel Hagan.
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