Watts was born, the daughter of Myfannwy "Miv" (née Roberts), an antiques dealer and costume and set designer, and Peter Watts, a road manager and sound engineer who worked with Pink Floyd (her father's manic laugh and mother's comment about "cruisin' for a bruisin'" are featured in the song "Money" from The Dark Side of the Moon).
Watts is pictured, in her mother's arms, with her father, brother, the band, and other crew members, in the hardback edition of drummer Nick Mason's autobiography of the band Inside Out.
Watts has one brother, Ben, a year older and now a photographer in the United States. Watts' parents separated when she was four years old, and when she was seven, her father died. Following her father's death, her mother relocated the family to Llanfawr Farm, on the Isle of Anglesey in North Wales, where they lived with Watts' maternal grandparents, Nikki and Hugh Roberts.
Watts described her mother as a hippie "with passive-aggressive tendencies" and no money, who used to threaten to send her and her brother to foster care in order to get her parents to provide for them. Although her mother occasionally moved the family around Wales and England, usually to follow boyfriends, she always ended up returning to Llangefni.
Watts lived there until she was 14. The family moved to Sydney in 1982. Her grandmother was Australian, which made it easier to obedittain the documentation necessary, since Watts and her family were entitled to Australian citizenship. Of her nationality, she has said, "I consider myself British and have very happy memories of the UK.
I spent the first 14 years of my life in England and Wales and never wanted to leave. When I was in Australia I went back to England a lot". But she has also clarified that she feels very much Australian after having lived there for many years and said, "I consider myself very Australian and very connected to Australia, in fact when people say where is home, I say Australia, because those are my most powerful memories."
In Sydney, Watts attended several acting schools, including North Sydney Girls High School, where her classmates included Nicole Kidman, with whom she is still close. In 1986 she took a break from acting and went to Japan to work as a model, but the experience, which lasted for about four months, was fruitless as Watts did not have the physical requirements for a professional runway model and could only hope to be working in promotions, which did not excite her.
Watts describes it as one of the worst periods of her life. Upon returning to Australia, she went to work for a local department store and from there she went to work as assistant fashion editor with an Australian fashion magazine. A casual invitation to participate in a drama workshop rekindled her passion for acting, and prompted her to quit her job and dedicate herself to succeeding as an actress.
Watts' career began in Australian television, where she appeared in commercials and series, including the melodramas Home and Away and Brides of Christ and the family sitcom Hey Dad..!. She was featured in a supporting role in the acclaimed 1991 Australian indie film Flirting, which starred future Hollywood up-and-comers Nicole Kidman and Thandie Newton. As Watts made the transition from Australia to the United States, she landed a supporting role in the cult 1995 film Tank Girl, playing the part of "Jet Girl".
Finding quality roles in the Hollywood system at first proved difficult. She appeared in the short-lived series Sleepwalkers and numerous B-list productions such as films like Children of the Corn IV. Gradually, Watts garnered supporting roles in films such as Dangerous Beauty. In 2001, she starred in The Shaft directed by Dick Maas, which garnered poor reviews.
In 2001, Watts starred in David Lynch's highly acclaimed Mulholland Drive. The film, which premiered at the 2001 Cannes Film Festival, won her the National Society of Film Critics Award as Best Actress and the National Board of Review award as Breakthrough Performance of the year.
Watts worked with director/screenwriter Scott Coffey on Lynch's Mulholland Drive, where Watts made her breakout performance. Her next film, the semi-autobiographical Ellie Parker, grew out of the friendship forged between Watts and Coffey. In 2002, she starred in one of the biggest box office hits of that year, the English language remake of the Japanese horror film The Ring.
The following year, she starred in the film Ned Kelly opposite Heath Ledger, Orlando Bloom, and Geoffrey Rush; as well as the Merchant-Ivory film Le Divorce with Kate Hudson. Her performance opposite Sean Penn and Benicio del Toro in director Alejandro González Iñárritu's 21 Grams earned Watts her first Academy Award nomination as Best Actress.
She produced and starred in the well-received independent film We Don't Live Here Anymore. She reunited with Sean Penn and Don Cheadle in The Assassination of Richard Nixon, teamed up with Jude Law and Dustin Hoffman in David O. Russell's ensemble comedy I Love Huckabees, and starred in the sequel to the Ring, The Ring Two.
She then starred in the much-anticipated remake of King Kong (2005) as Ann Darrow. The role, which was immortalized by Fay Wray in the original film, proved to be Watts' most commercially successful film yet. Helmed by The Lord of the Rings director Peter Jackson, the film won high praise and grossed $550 million worldwide.
Watts starred in The Painted Veil with Edward Norton and Liev Schreiber, released in December 2006. She has since finished the films Funny Games (a remake of the homonymous Austrian film by director Michael Haneke) with Tim Roth, and David Cronenberg's Eastern Promises with Viggo Mortensen.
The press has labeled her the "queen of remakes" because she has starred in so many of them; she is scheduled to star in the remake of Alfred Hitchcock's The Birds (1963). Watts will only state that there have been "discussions" about the "The Birds" remake.