Watson was the first British player to contest a semi-final match at the tournament since Jo Durie 32 years ago but she could not cope with the power of 19-year-old Keys, who also won their encounter in the first round of Wimbledon last year.
Watson was still struggling to get over glandular fever at that stage and had high hopes of a different outcome this time but it was not to be as Keys eased to a 6-3, 6-1 victory. She will contest her first WTA Tour final and will face the No.5 seed Angelique Kerber, who battled past Caroline Wozniacki 3-6, 7-6 (7-3), 6-3.
Despite the defeat it has been a hugely positive week for Watson, who secured the first top-20 scalp of her career by beating Flavia Pennetta in round two, before receiving a walk-over from the 2011 Wimbledon champion Petra Kvitova, who was suffering from a hamstring strain. Her ranking should climb around 10 spots from its current position of 70 ahead of Wimbledon, where she will open her campaign against another talented young player, the Croat Ajla Tomljanovic.
Samantha Murray, a 26-year-old wildcard entrant from Stockport, is anticipating the biggest match of her life in a "dream" first-round meeting with Maria Sharapova.
She will concede 237 world ranking places when taking on the new French Open champion at SW19 and admitted she will be treading new territory when she takes on the world No.5 next week.
"When I first heard the draw I was a bit shocked; I just see it as great opportunity to play someone of her calibre," said the world No.242.
"I assume I'll be on a big court as well so it's just a dream. I'm really interested to see how I do; how I stack up against one of the world's best ever champions. I've never played anybody in Sharapova's league; the highest-ranked opponent I've ever had has been around the 50 mark."
Determined to remain undaunted against the former Wimbledon champion, Murray hopes to benefit from first-round action last year.
"There's obviously a big gulf to make up in terms of rankings, but I just have to start strong, put my game on the court and try to impose myself on the match," she said. "I'm under no illusion that this is the biggest match of my life, but this is the kind of thing you dream of. I've played at Wimbledon before so hopefully the experience will help me. Last year it took me a little while to get used to everything but this year I know how everything works so I'm a lot more relaxed which is key. Regardless as to who I'm playing in the first round, I've wanted to play here since a little kid and to be able to play on a show court is the icing on the cake."
While Laura Robson remains on the sidelines as she makes a painstakingly slow recovery from wrist surgery, the other British hopes include Australia-born Johanna Konta, who takes on China's Peng Shuai, and the wild-card entrant Tara Moore, who has drawn another wild card, the Russian Vera Zvonareva. Naomi Broady will take on the Hungarian Timea Babos.
Of the Englishmen to receive wild cards into the singles main draw, James Ward, who provided sterling support for Andy Murray in the Davis Cup, will face the No.17 seed Mikhail Youzhny, the 31-year-old Russian, and Daniel Smethurst takes on the big-serving American, John Isner, the No.9 seed. Less daunting tasks face Dan Evans - he meets the 23-year-old Russian Andrey Kuznetsov, ranked No.114 - and Kyle Edmund, who faces the Austrian Andreas Haider-Maurer, the world No.96.