Watson, a native of Zimbabwe, overtook Romero on the back nine to claim his first victory of any kind in 23 years.
He shot 4-under 68 in the final round and finished at 9-under 279.
Watson is the first player born outside the United States to win the Senior PGA Championship since South Africa's Gary Player in 1990.
"It's been a long struggle, but I've had a lot of support," said Watson. "There's nothing like winning and there's nothing like having a great life. Now I've got both of them."
Romero, who led after the first three rounds, was done in by a late bogey and shot a closing-round even-par 72. Romero ended at 7-under 281.