Joe Pigott gave the Dons a 22nd minute lead before Ashley Nadesan equalised on the half hour. And just five minutes after the break Watters scored what proved to be the winner.
The Reds boss run the changes following the two home league defeats to Carlisle United and Grimsby Town.
Tom Dallison and Jordan Tunnicliffe line-up in defence while Nic Tsaroulla and David Sesay will feature on the flanks. Dannie Bulman is back in midfield and Nadesan partnered Watters in attack.
AFC Wimbledon, 12th in League One, feature former Red Ollie Palmer in the side.
After a quiet first 15 minutes, Tsaroulla created an opening, turning his marker inside out, and the ball feel nicely to Jack Powell but his low drive was blocked.
A minute later Powell sent a ball over for Watters but Connal Trueman was off his line quickly to get to the ball first.
But after Glenn Morris saved well from a deflection, Ethan Chislett got a superb cross in for Joe Pigott to powerfully header home.
However, on 30 minutes Crawley hit back and equalised. And again it was Powell who played a killer pass for Nadesan whi ran through and finished superbly to make it 1-1.
Crawley's player of the half Powell was booked just before the break.
And just five minutes after the break after a bit of a scramble in the Dons box, Watters smashed home to make it 2-1. And just three minutes later Morris pulled off a great save to keep it at 2-1.
Palmer was replaced by Ryan Longman as the Dons looked to get back in the game. Palmer had a quiet game and rarely threatened the Reds defence.
Tsaroulla impressed on his competitive debut and on 75 minutes he was replaced by Tyler Frost.
Crawley's defence, with Dallison outstanding, were rarely threatened but when the Dons did attack held firm. And the Reds had chances themselves but had done enough to progress to the third round.
AFC Wimbledon: Connal Trueman, Daniel Csoka, Terell Thomas, Anthony Hartigan, Ollie Palmer (Longman), Ethan Chislett (Rudoni), Shane McLoughlin, Ben Henegahn, Callum Riley, Joe Pigott, Steve Seddon. Subs: Nik Tzanev, Alex Woodyard, Will Nightingale, Cheye Alexander, Jack Rudoni, Nest Guiness-Walker, Ryan Longman.
Crawley Town: Glenn Morris, David Sesay, Tony Craig, Jordan Tunnicliffe, Nic Tsaroulla (Frost), Jack Powell, Tom Dallison, Jake Hessenthaler, Dannie Bulman, Max Watters, Ashley Nadesan. Subs: Stuart Nelson, Joe McNerney, Ricky German, Tyler Frost, Brian Galach, Sam Matthews, Sam Ashford.