Watson, who saved three match points against Ksenia Pervak in her previous match, was far from disgraced but Radwanska simply had too much guile as she moved through 6-3 6-1 in 84 minutes.
The Pole has now won her last 12 matches - a run which enabled her to claim the titles in Auckland and Sydney heading into the season's opening major.
Even a second-set rain delay - during which the roof on Hisense Arena was closed - could not halt Radwanska's progress as she advanced to a fourth-round clash with the winner of the all-Serbian tussle between Ana Ivanovic and Jelena Jankovic.
Despite her defeat, Watson can reflect with satisfaction on a good week Down Under - wins against Alexandra Cadantu and Pervak suggesting the 20-year-old from Guernsey is on course to remain upwardly mobile in 2013.
And she started well here, hitting back from 0-30 down to win the opening game.
She even had chances to claim a 3-1 first-set lead but Radwanska repelled the danger - firstly with a wide serve and secondly when Watson sent a backhand long.
Perhaps sensing the need to raise her performance level, the world number four held and then broke to move 3-2 ahead, her forehand down the line proving a particularly potent weapon.
She claimed the Watson serve once again to move 5-2 up and although Watson got one of the breaks back, Radwanska responded again to take the first set.
Watson, who is ranked number 50 in the world, may have been encouraged by Radwanska having to call the trainer to treat the little finger on her right hand but by then she had already wasted two chances to open the second set with a break.
A missed smash on the first was especially costly but there was nothing she could do but admire the audacity of the drop shot from Radwanska which saved the second.
The injury proved nothing more than a minor distraction for the 23-year-old from Krakow.
By now going through her full repertoire, Radwanska was dominant although Watson showed admirable resolve never to give up on the contest.
Watson got on the board in the sixth game but it proved merely to delay the inevitable as the title contender served it out.
British hopes in the women's draw now rest with Laura Robson, who enjoyed a stunning 11-9 final-set triumph over Petra Kvitova yesterday. Robson will meet another rising star, American Sloane Stephens, tomorrow.