Watson suffered a rib injury on his Springbok debut against Samoa last month, which meant he could not be considered for selection for the two home internationals in the Tri-Nations competition.
The 23-year-old suffered a recurrence of the injury on his comeback match for the Province against the Golden Lions in the opening round of the 2007 Absa Currie Cup competition.
Watson then withdrew from the Springbok touring team to Australasia, but criticism mounted as a week later he was back in his club team to play against the Sharks on Friday night.
"Following a medical assessment, Watson was ruled out of action for between seven and 10 days. On Tuesday the player underwent a further medical assessment and also a fitness test under supervision of his provincial team's doctor, which he passed," said a statement from the South African Rugby Union (SARU).
Andy Marinos, manager of the national team added that Watson was not included in the Springbok squad for the away-leg of the Tri-Nations due to uncertainty over his recovery time.
"The national selectors, after consultation with our medical team, decided that from a player welfare point of view it would be better for Luke to continue his recovery in Cape Town.
"However, he has now recovered fully and is available to play for his province."