Earlier this morning, Beard complained the show had been edited to make it look as though she deliberately sabotaged her rival's chances by taking the Baked Alaska dish - ice cream baked inside meringue - out of the freezer on purpose so it would melt.
A BBC statement said: "Diana will not appear in the rest of the series as she fell ill ahead of filming episode five earlier this year."
The 69-year-old from Shropshire - the show's oldest ever contestant - was heavily criticised on social media with some viewers branding her "evil".
She said she had been "stitched up" after she was blamed for the "bin-cident" which saw Watters storm off the show when his pudding melted.
When judges Mary Berry and Paul Hollywood asked to see his masterpiece, he showed it off in the only way he could - by holding the bin up to them.
Watters went online to defend Beard, saying: "Guys, no hard feelings now. Diana is a top lady and all us tent bakers are great pals. Can't wait to tune into the rest of the series."
He added: "I have seen all the controversy and I don't hold Diana responsible in any way. There are no grudges, we are still friends and keep in contact regularly."