The 28-year-old, who scored the winning goal in last year's FA Cup final, will miss the remainder of the current season and could have played his last game for the Latics
The midfielder, who scored a late winner against Manchester City in last May's Cup final, sustained the injury in a tackle with Martin Woods during Tuesday's 2-0 Championship win over Barnsley.
Watson was given lengthy treatment on the pitch at the DW Stadium, before being taken to hospital, and the Lancashire club have revealed he will undergo surgery before spending a lengthy spell on the sidelines.
The 28-year-old's injury is a major blow for Wigan, who are attempting to secure promotion back to the Premier League at the first attempt and also face a repeat of last year's final when they face City in this term's last eight.
Wigan manager Uwe Rosler told the club's official website: "Until everything was confirmed, we did not want to go on the record but we have now had time to make a good assessment.
"Ben will receive the best possible treatment and we will do everything to help him make a speedy recovery.
"He is a terrific professional, a fighter, and I am sure he will return from this latest setback like he did a year ago when he went on to experience the high of scoring the winning goal in the FA Cup Final at Wembley, and write himself into the heart of every Wigan Athletic supporter.
"To lose a player and a person of Ben's quality is a big blow to us but we will regroup and move on as a squad and keep trying to achieve our goals for the season, with the added incentive now of doing it for Ben."
Watson's contract expires at the end of the season so, unless he agrees a new deal, the former Crystal Palace man could have played his last game for the Latics.