The 47-year-old Australian actress locked lips with the 46-year-old British star after Watts presented her with the Excellence in Film award at the annual Women in Film event.
Kidman and her Flirting (1991) co-star donned shower caps for the smooch after she revealed she turned down a role in a Jane Campion movie at age 14 because it required her to kiss another female.
"I wanted to be the kind of actress with long, flowing hair and kissed boys," she said in her acceptance speech. "Today I know better. Jane, if you're out there, I'm ready to don a shower cap and kiss any women in the room."
"We've known each other since we were teenagers," she later told People of Watts. "We're like sisters. I mean, we've known each other for so long, though so many things. And this is kind of the sidebar of our life. Really, our life is all the personal stuff."
Kidman is scheduled for a number of upcoming projects, including Gertrude Bell biopic Queen of the Desert with James Franco and an adaptation of the Kevin Wilson novel The Family Fang with Jason Bateman. Watts will appear in Demolition with Jake Gyllenhaal.