The 34-year-old sustained the injury while bowling for Islamabad in the Pakistan Super League and promptly ruled himself out of the rest of the tournament to head home for assessment.
"I've unfortunately made this video because I injured myself last night bowling, so disappointingly I'm going to have to head home back to Australia to get assessed with the medical people at Cricket Australia to try and get right for the Twenty20 World Cup," Watson said in a video posted on his team's Twitter account.
Watson drew the IPL auctions' highest bid of 95 million Indian rupees ($1.39 million) from Bangalore, underlining his value in the shortest format in subcontinental conditions.
He has also been in ominous form with the bat in recent weeks.
But he may have to scramble to prove his fitness before Australia's World T20 opener against New Zealand on March 18 in Dharamsala.
Australia already have a number of fitness worries, with three other players in their 15-man squad nursing injuries.
Top order batsman Aaron Finch and all-rounder James Faulkner have been sidelined with hamstring strains, while fast bowler Coulter-Nile is recovering from a dislocated shoulder.
(Reporting by Ian Ransom; Editing by Greg Stutchbury)
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