Up-and-coming star Mitchell Marsh is set to come into the team with selectors unable to ignore his quality form in Ashes lead-up matches.
The 23-year-old scored back-to-back hundreds in Australia's two tour matches and has been bowling well in the nets at training.
Watson's omission will be the second big change to the Australian side, with backup wicketkeeper Peter Nevill to make his debut after Brad Haddin's withdrawal for personal reasons.
Selectors have finally lost patience with Watson's form after the 34-year-old was given out LBW twice in the first Test in Cardiff - meaning he has been out 29 times with that type of dismissal in his career.
Having been a part of the Australian set-up for the past decade, Watson's omission is a big shift in policy with selectors determined to stick with Marsh for the rest of the Ashes series.
There are questions marks over Marsh's bowling, with the West Australian youngster only taking one wicket in the four Tests he has played.