Watson also had a long spell in charge of the Otago provincial side and the Junior All Blacks, which included a famous victory over the All Blacks in 1973.
He spent two seasons with the All Blacks in 1979-80 and stepped down after a 23-3 victory over Wales at Cardiff Arms Park.
"It is with real sadness that we mark the passing of Eric Watson," New Zealand Rugby Chairman Brent Impey said in a statement.
"Eric made a huge contribution as head coach of the All Blacks, Junior All Blacks and Otago and was a big part of rugby for a long time.
"He remained a stalwart supporter of rugby after retiring, continuing to turn out on the sidelines for many years."
(Reporting by Greg Stutchbury; Editing by Peter Rutherford)
