The pre-race favourites led from start to finish to claim a magnificent victory at Eton Dorney ahead of Australia in second and Poland in third.
The win was extra special for Grainger, 36, who finally has an Olympic gold to add to three silvers.
Grainger said: “I feel this medal, of all of them, is the people's medal. I feel so many people have been behind me and supported me and wanted this for me as much as I have, every single person's been a part of this and it makes the medal seem so much more special”.
Watkins added: “I just can't believe it. We had a dream and so many successful races. It was just another race but this was the right one”.
The silver medal went to Kim Crow and Brooke Pratley of Australia, Julia Michalska and Magdalena Fularczyk from Poland took bronze.
Grainger and Watkins teamed up more than two years ago and have been unbeaten since, winning the World Championships for the past two seasons - and now adding Olympic glory.
The medals take Britain up to fourth in the overall table, with six golds, six silvers and six bronze medals.
And Britain's brilliant day continued when Alan Campbell won bronze in the men's single sculls a short time later.
- Tags: Olympics Games London 2012 Katherine Grainger Anna Watkins Ladies lake Team GB scores women Britain glory sixth gold medal performance final women's_double_sculls pre-race favourites led victory Eton Dorney Australia second Poland third win Grainger 36 Olympic_gold three silvers Watkins dream Kim Crow Brooke Pratley Julia Michalska Magdalena Fularczyk overall table six_golds six_silvers six_bronze_medals Alan Campbell men's_single_sculls
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