The West Midlands side were losing 2-1 to West Ham before the Englishman toe-poked the ball into the back of the net in stoppage time.
But a lengthy analysis from VAR decided that his shoulder was inches offside on Vladimir Coufal, denying Villa a famous win at the London Stadium.
And Premier League viewers jumped on Twitter to criticise the use of the system in the game.
"Watkins must be devastated right now," one supporter said.
Another commented: "I feel sorry for him.The line used on Watkins in the review was at his elbow I thought. Thought it was the shoulder they measured against."
While a third held nothing back, with: "VAR needs to go. It's destroying the game. Ruining the sport.
"That's one of the worst calls I've seen yet. Watkins judged offside by his arm which is raised as he's being swung about by the defender! So it should at least be a peno!"
And a fourth added: "So Watkins is offside because the arms on his shirt are slightly longer than Coufal’s.
"VAR needs to go to Specsavers."
Watkins' disallowed goal has now seen Jamie Carragher make a U-turn on his position with the Premier League system.
Speaking on Sky Sports after the game, the former Liverpool defender said: “It’s frustrating football fans seeing goals like that ruled out on such fine margins.
"I was a massive fan of VAR. They were bringing it in to help the game.
"I was defending it at the start as there were teething problems but now we’re at the stage where the majority of people in this country have bought into VAR.
"I don’t think people are enjoying football as much.
"The moment that sums it up for me is David Marshall saving the penalty for Scotland, a massive moment in his career and he couldn’t celebrate as he was waiting for the referee. If I could go back I would use VAR in a different way."