Watters spent the past two seasons as the Magpies' Defensive Assistant Coach, and has played a significant role in the club's success in that time.
Collingwood Coach Nathan Buckley said: "I'd like to congratulate Scott on behalf of everyone at the football club.
"We've formed a close working bond over the past two years and he's clearly made a significant contribution to the club working under Mick Malthouse, so it's great to see Scott given this opportunity.
"Scott's appointment, along with Mark Neeld being named Coach of Melbourne recently, highlights the strength of the club's football program and its ability to foster coaching talent. This is a strength we believe will continue with our recent coaching appointments."
The club is working through the process of appointing a replacement for Watters and will make an announcement in due course.
Collingwood has made a number of changes to its coaching structure since the conclusion to the 2011 season.
In addition to Buckley taking over from Malthouse as Coach, former Western Bulldogs and Sydney Coach Rodney Eade has been appointed to the new position of Football and Coaching Strategist, while former Adelaide premiership player Ben Hart has come on board as Defensive Coach.
Last week the club also announced that three new full-time development coaches - Anthony Rocca, Mitch Hahn and Dale Tapping - have been appointed.
