"The Masters may be my last next year," Watson told reporters after a 2-under 69 at Harbour Town.
Watson, 65, made a PGA Tour cut for the 501st time this week in South Carolina. He made his first Masters appearance in 1970 and has played every year since 1975. He donned the green jacket in 1977 and 1981.
Watson grabbed headlines with an opening-round 71 last week at Augusta National, but he faded with a second-round 81 to miss the cut. He has made the cut at the Masters only once since 2003, a T-18 finish in 2010, and admitted that it is becoming increasingly difficult for him to keep up with the demands of the modern game.
"The distance is ebbing away in this old body," he said. "That's something I have to deal with and understand there's going to be a time when I have to hang it up ... The handwriting is on the wall as far as me competing out here against the kids."
Watson will make his final Open Championship start this summer thanks to a special exemption from the R&A, making one last trip around St. Andrews in an event he has won five times. He still plays sparingly on the PGA Tour, and is expected to tee it up at the Crowne Plaza Invitational next month.
Should he call it quits at Augusta National next spring, he would be the third former champ to do so in as many years. Craig Stadler, who won the Masters in 1982, made his final competitive appearance in 2014 and two-time champ Ben Crenshaw made his final start at Augusta National last week.