Keys is one of the hottest talents on the women's game after breaking into the top 50 last year and she will now challenge for her first title against Angelique Kerber on Saturday in Eastbourne.
The 19-year-old stepped up her Wimbledon preparations with a 6-3 6-1 semi-final victory over home hope Watson, who the American beat in the first round at the All England Club last year.
Keys started strongly with an early break and served well to take the opening set. She took full advantage in the second as Watson struggled to hold with Keys winning six games on the trot to progress.
For Watson, it was a disappointing end to a promising week that saw her become the first Briton to reach the semi-finals at Eastbourne since 1982.
Kerber will face Keys in the final after she came from a set down to beat eighth seed Caroline Wozniacki 3-6 7-6 (7-3) 6-3.
The German has a fourth career WTA title in her sights thanks to a spirited comeback that left her Danish opponent struggling to hold serve in the final set.
In a match littered with break point opportunities it was Wozniacki who took the first, but her game slowly began to unravel having won the opening set.
Fifth seed Kerber broke her opponent four times in the decider to secure her victory.