Watsons Bay is a harbourside, eastern suburb of Sydney, in the state of New South Wales, Australia. Watsons Bay is located 11 km north-east of the Sydney central business district, in the local government area of the Municipality of Woollahra.
Watsons Bay sits on the end of the South Head peninsula and takes its name from the sheltered bay and anchorage on its western side, in Port Jackson (Sydney Harbour). It provides views across the harbour to the Sydney Harbour Bridge. The Gap is an ocean cliff on the eastern side with views to Manly at North Head and the Pacific Ocean. Vaucluse is the only adjacent suburb, to the south.
Watsons Bay is a mostly residential area with some recreational areas and beaches, including Camp Cove and a legal nude beach located at Lady Bay. Some restaurants, cafes and a hotel are located here. The coastal walk with ocean views of the Gap along South Head make Watsons Bay a popular tourist attraction in Sydney. The Sydney Harbour Pilot Boat Station was located on the bay, and the naval training base HMAS Watson is located nearby at South Head.