In the boldest of moves possible, the PGA of America confirmed Watson had been given back the job he did at The Belfry in 1993 - the last time Europe lost at home - and entrusted with the task of ending a run of five American defeats in the last six matches.
By the time he leads the United States out at Gleneagles in September 2014, the five-time Open champion - so close to winning the Claret Jug again just three years ago - will be 65.
That will make him eight years older than America's previous record-holder Sam Snead and three years older than JH Taylor was when he led Britain, as it was then, back in 1933.
Watson, who last weekend made the cut at the Australian Open and then was the only player to break 70 on the final day, looks certain to be up against either Darren Clarke or Paul McGinley, 44 and 45 respectively. That decision is expected next month.
Four years ago Europe lost under 51-year-old Nick Faldo and it was decided after that to go for younger men who were more in touch with the current stars.
Colin Montgomerie did it in Wales at 47 in 2010 and Jose Maria Olazabal this year at 46. Seve Ballesteros was only 40 at Valderrama in 1997.
The policy has worked then for Europe, but the PGA of America, which has not had anybody older than 50 in charge since Snead in 1969, has decided it is time for a change of approach.
President Ted Bishop said ahead of the announcement: "I think we've done something a little bit different.
"The role of the PGA of America in naming a Ryder Cup captain should not be to name somebody to reward them for their previous playing experiences.
"We need to look for captains that are going to put our team in the best position to win it.
"We're tired of losing. And whether it's him (Watson) or it's somebody else, that's what our mission is."
The victory under Watson 19 years ago was the only time Europe has lost on home soil since 1981.
Watson appeared on NBC television before a teleconference at the Empire State Building in New York.
"I was waiting 20 years to get the call again," he said. "It's a great honour to do it again and this time it is going to be 14 and a half points.
"I loved it the first time. I've been a great fan of the Ryder Cup - I get the same gut feeling just watching it at home on TV."
Woods said in a statement: "I'd like to congratulate Tom Watson on his selection as Ryder Cup captain.
"I think he's a really good choice. Tom knows what it takes to win and that's our ultimate goal.
"I hope I have the privilege of joining him on the 2014 United States team."
Bernard Gallacher, who was Europe's captain when Watson led America to victory at The Belfry in 1993, described the 63-year-old's recall as "very clever".
"It is a surprise," Gallacher said. "The USPGA obviously decided they needed a bit of experience over in Scotland and Tom is probably the most respected figure in the game today.
"He's done the job before, he's been there as a player, he knows how to win in Europe and in Scotland as well."
Four of Watson's five Open titles between 1975 and 1983 came north of the border.
"He's well liked there, so this is a very clever appointment in my opinion," Gallacher added.
"It looks like it will be a young, inexperienced team next time and they probably feel they need a very experienced leader.
"In recent years they have picked someone who is still playing on the main tour, but Tom Watson is still in touch with many of the top players. He still plays in our Open championship and the players will certainly know him."
As for his memories of 19 years ago Gallacher, who was in charge for the second of three matches, added: "I didn't feel intimidated. He was very straightforward, uncomplicated.
"They played well. We were leading going into the singles, but his team came through - like the reverse to Medinah in a way.
"He said the right things. He has great experience in speaking to the media.
"The Ryder Cup has become very important to America - Medinah was a complete sell-out - and it's an event they want to win.
"Also Tom Watson will keep the Ryder Cup on the front page of the golfing press for the next couple of years. All in all, Tom Watson is going to be good for the Ryder Cup."
Watson spoke out against Tiger Woods following his sex scandal in 2009, and not only for his off-course behaviour.
"Tom Watson is a very straight talker and when he criticised Tiger for swearing and spitting and all that I think he said what we all felt," Gallacher said.
Colin Montgomerie, who played under Gallacher against Watson and went on to become a winning captain in Wales two years ago, called Watson's appointment "very wise" but believes there is now a lot of pressure on him.
"What happens if he fails?" he said. "He has to win now. If he doesn't succeed at Gleneagles what's going to happen in 2016?
"There is a lot of pressure on Tom Watson, but he can handle that - I'm sure he can. I personally wish him well.
"He was very respected back in '93 - of course he was - and having won eight majors, four of which were won in Scotland, he will be very favoured here.
"Since his achievement in 2009, how close he came to winning the Open again, he's even more respected now and I think it's a very wise appointment.
"It might change Europe's view. We have a voting situation coming up and have to decide who to take on as our captain.
"We tend to go with someone younger who is playing on the Tour, so you have to think of the likes of Darren Clarke or Thomas Bjorn or Paul McGinley.
"It will be a task for anybody to take on Tom Watson because he is very well respected, very well liked and loved here in Scotland."
Montgomerie has never ruled himself out of doing the job again, but does not expect to be asked.
"It's the greatest honour bestowed on any European golfer. I had that honour, but I think it's a one-hit deal now.
"The days of Tony Jacklin doing it four times and Bernard Gallacher three are in the past now. There are some great candidates within the European Tour and I wish them well."