The 43-year-old star has been cast in Oliver Hirschbiegel's upcoming drama "Caught In Flight", which will tell the story of the last two years of the late royal's life before she died in a car crash in Paris, reported Contactmusic.
However, Watts says she had reservations about playing such a high-profile part and nearly refused the offer because of her fears.
"She is a part of our history, an incredible woman and fascinating but suffered a tragic ending. The filmmakers came to me and it is a good script and it is very scary and I kind of wanted to say no but I couldn't.
"I saw the wedding and she is a very inspiring woman and it is kind of impressive how she changed the whole gearing of the tradition of the royal family and opened it up and brought warmth to it," she said.
Watts is planning to research for the role, which will go on the floors in the UK later this year.
"I am doing all the research and there is so much to read, I just hope we make a good film and people can learn something new about her that is interesting. There are a lot of people that knew her and a lot of books to read and so much information and one story is different to the next so it is hard to gauge the truth. It is going to be a tough one, I just try to do my best," she said.
