Watson had been an integral part in the United's campaign both with the bat and ball.
The PCB spokesman confirmed that Watson is out of the event.
"Shane Watson is out of the PSL due low grade strain on left lower abdominal muscle," he confirmed.
Watson, Tait back in T20 squad to face India
"The news from the United's camp is he is flying back tomorrow and the replacement would be named in due time."
United has not had a good campaign so far with just four points from six matches.
PSL T20: Peshawar draws first blood against United
There other players such Mohammad Sami, Andre Russell and Misbahul Haq are also carrying minor injuries as the battle to stay in the competition.
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