The Spaniard will take over from Jupp Heynckes at the end of the season following his year-long sabbatical, despite being linked with a number of posts around Europe.
Watzke admitted that he was "surprised" when he heard the news and believes that it is a coup for German football.
"That's a big thing for the league," ESPN quotes Watzke as saying. "It will give the league more reputation internationally.
"When I heard about it, I was quite surprised. I know how hard it is to get a coach like him."
Guardiola won 14 trophies in his four years at Barcelona.