Watson carded a second-round 68 in testing conditions at Augusta National to finish seven under par, three shots ahead of Australian John Senden with Bjorn, Blixt and defending champion Adam Scott of Australia on three under.
Augusta specialist and 1992 champion Fred Couples was another shot back, the 54-year-old looking to become the oldest major winner and benefiting from the kind of luck which saw his tee shot on the 12th somehow stop on a downslope and stay out of Rae's Creek - just as it did in the final round 22 years ago.
Watson, who adopted a month-old son with his wife Angie shortly before his Masters win, withdrew from his last event after blaming an opening 83 at the Arnold Palmer Invitational on his head being "all discombobulated" due to severe allergies.
But the 35-year-old from Bagdad, Florida, did claim his first PGA Tour title since the Masters in February, shooting back-to-back bogey-free rounds of 64 to win the Northern Trust Open.
"This year I'm trying to get the [green] jacket back," said Watson, who had five birdies in a row from the 12th before a bogey on the 18th, only his second dropped shot of the week.
"You are not the main man, the champions' dinner is not about you. I was in awe when it was my dinner, you're sitting there amongst the great champions that are in. This year I got to be just a bystander, one of the guys, and it's Adam's night.
"Media attention is on the defending champion. You're asked all these questions, can you defend, how are you going to play, how are you going to do this? You have to give up the green jacket.
"For me I didn't know how to handle it the best way and so I didn't play my best golf last year. But this year I came in here with no media attention, somehow I was lost in the crowd a little so I could go about my practice rounds without much attention."
Although he does not drink, Watson admits he suffered from a hangover of sorts following his win in 2012, given his unusual background for a professional golfer.
"You've got to think about where I've come from, my mom having two jobs to pay for my golf, my dad working in construction," he added. "And when you think about that and where I am in my career, you're thinking about how great this was.
"My year, my career was complete after that win so obviously I was going to have a hangover. Never been drunk before, but a hangover from the green jacket. I do everything my way. I learned the game my way, figured it out my way. So it just takes me a little bit longer with the mental focus and drive to get back to where I am today."
Bjorn had been 51 over par for his previous 10 Masters appearances before rounds of 73 and 68 this week, the 43-year-old Dane recording four bogeys and eight birdies, four of them coming in the last five holes.
"I played well all the way through and felt comfortable on the golf course today," Bjorn said. "I hit two great shots into 13 and walked off with a par and after that decided I needed to be more aggressive. I took the shots on at 14 and 16 and they paid off and it was nice to walk up and tap it in for a birdie on 18."
Scotland's Stephen Gallacher was also delighted with his second round, a 72 leaving him one under and guaranteed to make the halfway cut on his Masters debut - something his uncle Bernard, the former Ryder Cup captain, was unable to do in 1970.
Former Open champion Louis Oosthuizen, who lost a play-off to Watson in 2012, held a share of the lead when he holed from five feet for an eagle on the 13th.
But the South African then ran up a triple-bogey eight on the 15th after chipping from the back of the green into the water at the front, before a bogey on the 18th meant a round of 75 and left him level par for the tournament.
Rory McIlroy sneaked in on four over after a 76 but three-time champion Phil Mickelson missed missed his first cut since 1997 after a triple-bogey on the 12th, where he amazingly went from the front bunker to the back bunker and back into the front bunker again.
A 73 left Mickelson five over par, but playing partner Justin Rose - who was six over after 12 holes on Thursday - bounced back from an opening 76 with a round of 70 to lie two over, as did Ryder Cup team-mate Ian Poulter.
The British amateur champion Matthew Fitzpatrick from Sheffield had a birdie putt at the last to make the cut but missed to finish on five over after adding a commendable one-over 73 to his opening 76.