The move came hours after the team had ruled out Watkins for Sunday's game at the undefeated New England Patriots due to soreness in his surgically repaired left foot.
Watkins, the No. 4 overall draft pick in 2014, will not be eligible to return to the Bills for eight weeks.
Although the team had previously said Watkins' issue is one of pain management, Bills head coach Rex Ryan on Friday acknowledged to reporters that there is "major concern" the injury could turn into a long-term problem.
Watkins complained of soreness in the foot after hauling in four catches for 43 yards in a season-opening 13-7 loss to the Baltimore Ravens. He underwent an MRI exam but played against the New York Jets four days later, and posted two receptions for 20 yards.
Despite the absence of Watkins, Buffalo broke into the win column with a 33-18 drubbing of the visiting Arizona Cardinals last weekend.
Watkins missed only three games in his first two seasons despite dealing with a myriad of injuries -- ribs, groin, hip, hamstring, calf and foot -- that landed him on the injury report or caused him to be removed from games.
Watkins had 60 catches and nine touchdowns in 13 games last season after hauling in 65 receptions for six scores during his rookie campaign.
Buffalo replaced Watkins on the roster by claiming wide receiver Justin Hunter on waivers. Hunter, a former second-round pick of the Tennessee Titans in 2013, was released by the Miami Dolphins on Wednesday.
Hunter has appeared in 36 games and recorded 68 receptions for 1,116 yards and eight touchdowns in his career.