The Oscar-nominated Impossible star plays Diana in the film about the final years of her life and looked suitably regal in a floor-length white gown and diamonds while greeting and waving at fans.
Watts, 44, portrays Diana's relationship with Pakistani heart surgeon Hasnat Khan, played by Lost actor Naveen Andrews, and then Dodi Fayed (Cas Anvar) before her death in a car crash in Paris.
The film has courted controversy in the build-up to the premiere, with Watts herself admitting she may have to "leave the country" following the release.
The actress had turned down the part twice before and said of her reasons for finally accepting it: "I guess the challenge of taking on that kind of transformation and it's annoying when fear gets in the way of things.
"I was afraid to play the most famous woman of our time. How do you take possession of a character like that and also the sensitivity of it, the concerns of how the rest of her family feel about it?"
Diana is released in cinemas on October 20.