Watson - the British number one - was sent packing from the Canadian city by the third seeded German 6-7(5) 7-6(5) 6-1.
Watson held her nerve in a close opening set tie-break, taking it to three, but lost the second after the scores were reversed in another tie-breaker.
The 19-year-old from Guernsey was then overpowered in the third as the world number 36 eased up a gear, sealing victory in two hours and 38 minutes.
Second seed Yanina Wickmayer stormed into the second round with a regulation 6-3 6-3 win over Alison Riske of the US, but number five seed Romina Oprandi was beaten 6-1 7-6(11) by another German in the form of Annika Beck.
Slovakia's world number 13 Dominika Cibulkova is the top seed at the tournament, and she kicks off her campaign against Kirsten Flipkens on Tuesday.