Watson, under pressure for his place at number three in the batting order, was knocked to the ground when a short ball from James Pattinson hit him flush on the helmet.
"Watson shaken up, but OK, after helmet blow," tweeted Cricket Australia.
Pattinson was also shaken up by the incident, which came less than a month after former Australia batsman Phillip Hughes was killed by injuries sustained when he was hit by a short ball in a domestic match in Sydney.
Left-arm paceman Mitchell Starc also left the session early after being hit on the knee by a ball but his likely replacement in the side, Ryan Harris, was apparently untroubled by the thigh injury that ruled him out of the second Test.
The hosts, who take a 2-0 lead into the Boxing Day Test, already had injury concerns over David Warner, who skipped the session to nurse a thumb injury he sustained on the final day of the four-wicket victory in Brisbane on Saturday.
India up against MCG record to save series
India must reverse a demoralising losing streak at the MCG to prevent Australia from regaining the Border-Gavaskar Trophy in Friday’s Test.
MS Dhoni's tourists have lost their last five encounters at the MCG stretching back 23 years.
While India have competed well in the series, they unravelled both times in their second innings.
"There are plenty of areas we're showing improvement, but we're still not crossing the line," said Dhoni. "We need to give it a bit more time. Once they start crossing that line, once they harness that aggression in the right channel, you'll see plenty of good results from this side."
While India routinely master Australia on their home pitches, winning the last seven Tests straight, it's the reverse situation Down Under. But the tourists now have pace weapons with Varun Aaron, Umesh Yadav and Ishant Sharma.
"We have seen the execution power of our fast-bowlers has increased,” said Dhoni.
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