Watson, who is still looking for his first win in Florida, began his day with a stretch of three consecutive birdies from the fourth before three-putting for bogey on the par-4 seventh.
He made the turn at 2-under and quickly picked up back-to-back birdies starting at the 10th. The 2001 Senior PGA Championship winner then added another birdie on the 14th before stepping on the tee at the 163-yard 16th.
Watson hit his 6-iron to the front of the green and waited for the crowd to tell him the ball rolled in for an ace, the 13th hole-in-one of his career and his first on the Senior Tour.
'I couldn't see the pin but I saw the gallery behind the green. When all the arms went up, I knew it was in.
'The hole-in-one really came at the right time,' said Watson, who moved three shots clear of the field with the shot. 'The proverbial icing on the cake.'
Quigley had nine birdies and two bogeys for his 65. The Senior Tour iron man, playing in a record 155th straight tournament, bogeyed the 17th but ran home a 12-footer for birdie on the last to grab sole possession of second place.
'I love Naples,' said Quigley. 'Jack designed a course you could make some birdies on. I had my putter going today.'
The course at the TwinEagles Golf Club saw quite a few eagles during the opening round as well, including a 20-foot putt by Jim Thorpe on the par-5 13th. The putt helped move Thorpe into third at 6-under 66.
'Perfect round of golf,' said Thorpe. 'I left two or three birdies out there but overall I made some nice putts today.'
Allen Doyle played a bogey-free round with five birdies to finish three shots off the lead in forth place. He was followed by a group of five players at 4-under 68, including Hale Irwin.
Defending champion Gil Morgan carded a three-under 69. He finished in joint 10th alongside Mike Smith, Jay Sigel, Stewart Ginn, Jim Dent and John Bland.
Ben Crenshaw made his much anticipated Senior Tour debut Friday. The 19-time PGA Tour winner was scheduled to make his first start on the 50-and-over circuit last week at the Royal Caribbean Classic but withdrew from the tournament with flu-like symptoms.
Crenshaw struggled on the front nine with a bogey at the fourth and a double-bogey at the eighth. He seemed to rid himself of the jitters on the inward nine with a birdie at the 10th and a stretch of three consecutive birdies from the 13th.
However, the two-time Masters champion finished in disappointing fashion with a bogey at the 17th and a quadruple-bogey at the par-5 18th to complete a 4-over 76.
'I will try to forget this round,' said Crenshaw, who earned his breakthrough PGA Tour victory in his first start at the 1973 San Antonio-Texas Open. 'Can't compare my first event on the PGA Tour and today.'
Full-field scores from the ACE Group Classic