Watson, who injured a hamstring in a domestic one-dayer last Friday, was not confident he would be fit enough for the rigours of a five-day Test and was omitted.
The all-rounder, seen as a fifth bowler to share Australia's bowling load, was only able to run laps of The Gabba Tuesday with team physiotherapist Alex Kountouris.
Both agreed Watson would only be able to have played at 70 percent in the Test and decided it was not worth the risk.
"I've done everything I can over the last three days to give it a shot but unfortunately I was only a few days away," Watson said.
"It's not a good feeling, it's something I've been working towards over the past six months.
"I feel my game has really improved and that I have earned a spot in this Australian cricket team."
Watson said he would now aim at recovering in time for the second Test in Adelaide, which starts Dec 1.
Clarke, who was named as cover for Watson, will now play in his 22nd Test match and Australia will go into the game with four bowlers, three quicks and Shane Warne's leg-spin.