A source told People magazine that the two have been dating for a while.
"They have been dating for a little bit now, but it's still pretty new," s/he said.
"They met through friends. They might seem like an odd match but they actually have very similar personalities," the insider added.
Watson, 27, and Overstreet, 29, were spotted walking hand-in-hand recently as the duo took a stroll on a lazy afternoon.
They had previously been seen leaving the Vanity Fair Oscars party together, accompanied by friends.
The duo first made headlines when they attended a concert together last month.