Watson, from Zimbabwe, edged Romero by two strokes to win his first title in 23 years and become the first international Senior PGA winner since Gary Player in 1990.
"It's been a long struggle," Watson said. "I've had a great life between not being able to play and being able to play again."
Romero, the Argentine star known as "El Gato," had handled The Ocean Course's famed sand dunes and Atlantic gusts the best of anyone the first three days. He was still ahead by two shots after birdies on the 11th and 12th holes pushed him to 10 under.
That's when things fell apart for Romero - and Watson took advantage. Romero followed a bogey on the 13th hole with a double bogey on the par-3 14th when his tee shot all but buried in soft sand.
"I knew from tee that it would (be plugged)," Romero said. "I thought 4 would be good. But I make double."
Watson, meanwhile, stuck his tee shot about 12 feet from the hole, urging it on with, "Be right. Be right. Be right. Be right. Yes!" Watson completed Romero's fall with a birdie, pumping his fist in triumph as he went to 9 under and gained a two-shot lead.
Watson briefly gave Romero hope. On the 15th hole, Watson's bogey sliced the lead to one. But Watson came back with birdie on the 16th to restore the margin.
Watson made pars on the 17th and 18th - he'd played the holes 6-over par the first three rounds - for a 68 as he closed out his first victory since taking three PGA Tour titles in 1984.
Watson again pumped his fist when his final putt went in, removing his wide-brimmed hat as the gallery applauded.
"All the time, I kept watching Nick (Price)," Romero said. "I'm not thinking Denis."
Romero's 72 was the first time he didn't go under par in the event.
Romero was trying to take back-to-back Champions Tour majors after winning The Tradition during his rookie season a year ago.
Price (71) finished at 6 under for third, his best placing since joining the Champions Tour this season.
Naomichi "Joe" Ozaki (72) was fourth at 4 under. Tim Simpson (70) was next at 2 under, and Brad Bryant (71) was another stroke back.
They were the only players to finish under par on Pete Dye's challenge seaside course, built for the 1991 Ryder Cup matches and hosting its highest profile tournament since.
Although forecasts called for wind of 10 (16.09) to 15 mph (24.14 kph), tournament officials did not shorten holes for the final round. The par-3 17th played at 202 yards, nearly 50 yards longer than the 158 of the third round.