Britain's Watson, who has battled back to the brink of the top 50 after seeing her progress derailed by glandular fever, endured a topsy-turvy ride against the Slovakian world number 12, dominating the first set and going 4-0 up in the second before letting her opponent back into it.
Qualifier Watson was a break up in the decider too, but found herself staring defeat in the face against the Australian Open finalist before scrapping back to win the tie-break.
The 22-year-old Channel Islander faces Victoria Azarenka for a place in the quarter-finals.
Fourth seed Maria Sharapova rallied for a 4-6 6-3 6-1 second-round win over Spain's Garbine Muguruza while Serena Williams destroyed former US Open champion Samantha Stosur as order and power was otherwise largely restored in Montreal.
A day after the tournament was left without power and its main attraction when Canada's Wimbledon finalist Eugenie Bouchard suffered a surprise opening-match loss, the event enjoyed a return to normalcy as the electricity was back on and Sharapova moved onto the third round.
World number one Williams, just days after bagging her fourth title of the year at Stanford, then joined her with a 6-0 6-2 thrashing of 2011 Flushing Meadows champion Stosur in a touch under an hour.
"It's been a few weeks since I've been in that competitive atmosphere," said Sharapova, who has not played since her fourth round loss at Wimbledon. "It's always quite different, no matter how much you train, you try to prepare for that.
"Once you step on the court, you feel a little bit more from the crowd, the energy. You get inspired by everything. But you're ultimately a bit rusty."
The French Open champion was far from sharp in her return as the promising young Spaniard took advantage of several errors by the Russian to grab the opening set.
But Sharapova, a three-times winner this season, was able to convert on the big points to stay on track for a first ever title on the Canadian hard courts.
"I didn't feel good, I made a lot of errors in the first set," said Sharapova. "When you're able to finish stronger than your start, that's always a positive because you give yourself an opportunity to keep playing in the tournament.
"When you're in that position, there's always another chance to work in another match to improve and get better."
Kerber has had a solid start to her North American hard court campaign after reaching the final in Stanford last week but in four visits to Canada has never advanced past the third round.
Eleventh seed Caroline Wozniacki of Denmark, the 2010 Canadian champion, thrashed Czech Klara Koukalova 6-1 6-2 while ninth seeded Serb Ana Ivanovic was sent packing, losing to American qualifier Coco Vandeweghe in three sets.
Rogers Cup results
Coco Vandeweghe (U.S.) beat 9-Ana Ivanovic (Serbia) 6-7(7) 7-6(7) 6-4
2-Petra Kvitova (Czech Republic) beat Casey Dellacqua (Australia) 6-3 6-2
Venus Williams (U.S.) beat Yulia Putintseva (Kazakhstan) 6-3 6-2
1-Serena Williams (U.S.) beat Samantha Stosur (Australia) 6-0 6-2
7-Jelena Jankovic (Serbia) beat Sloane Stephens (U.S.) 6-7(7) 6-4 7-6(4)
Sabine Lisicki (Germany) beat Madison Keys (U.S.) 4-6 6-1 6-4
15-Lucie Safarova (Czech Republic) beat Magdalena Rybarikova (Slovakia) 6-4 6-2
4-Maria Sharapova (Russia) beat Garbine Muguruza Blanco (Spain) 4-6 6-3 6-1
11-Caroline Wozniacki (Denmark) beat Klara Koukalova (Czech Republic) 6-1 6-2
14-Carla Suarez Navarro (Spain) beat Karolina Pliskova (Czech Republic) 6-1 3-6 6-3
Ekaterina Makarova (Russia) beat Elena Vesnina (Russia) 6-3 6-2
Heather Watson (Britain) beat 10-Dominika Cibulkova (Slovakia) 6-2 6-7(3) 7-6(5)
6-Angelique Kerber (Germany) beat Caroline Garcia (France) 6-4 6-1
- Sports & Recreation
- Maria Sharapova
- Serena Williams
- Garbine Muguruza