The blonde beauty moved to Hollywood with a five-year plan to break into the business, but after a decade of rejections, she was ready to call it quits.
However, Watts persevered on the advice of her best friend, Nicole Kidman.
She explains, "I consider myself a fairly sensitive person, but I don't think a strong person could cope with it (rejection) over and over again. There were moments when I was sure I was done... but I didn't have a B plan, really, I didn't.
"(Kidman) kept saying, 'It's just gonna take one thing, one thing Nay. If you're in a hit film, then everything changes.' And that's what happened, she was right."
That film turned out to be Oscar-nominated Mulholland Drive, but Watts admits she had little faith in director David Lynch's script because her character, who embarks on search for clues to her identity after surviving a car crash, marvelled at everything she set her sight on.
She says, "I thought I was doing a ridiculous performance. Everything was (gasping), I'm like, 'Who acts like that?!'"
Watts went on to score her first nod for an Academy Award after starring in 2003 crime drama 21 Grams before becoming King Kong's leading lady in Peter Jackson's 2005 film - and it was only then that the actress realised she'd made her mark on Hollywood.
She recalls, "I remember calling up David Lynch, who's my mentor, and he said to me, 'Naomi, anyone who sits in the hand of King Kong is a movie star for life.'"