The contest appeared to be heading for extra-time, with Harry Kane's penalty cancelling out an early rocket from Xavi Simons, but Watkins came off the bench to secure the victory for Gareth Southgate's side.
The Three Lions will now tackle Spain in Sunday's showpiece event for the trophy.
Here, Sports Mole provides an in-depth analysis of the semi-final, including highlights, our man of the match and the best statistics.
HIGHLIGHTS
7th min: GOAL! NETHERLANDS 1-0 ENGLAND (SIMONS)
Stunning goal for Netherlands, as Simons takes the ball away from Declan Rice in a dangerous area before picking out the top corner with a wonderful effort. Brilliant strike from the attacker, who had worked his way to the edge of the box before flashing one past goalkeeper Jordan Pickford.
12th min: England threaten, as Rice meets a deep free kick and looks to turn the ball towards Kane, but Netherlands are able to make the clearance. Better from the Three Lions.
13th min: Smart save from the Netherlands goalkeeper Bart Verbruggen to keep out a long-range effort from Kane.
14th min: Kane smashes one just over the crossbar from inside the box after excellent work from Bukayo Saka, with the Arsenal attacker driving into the Netherlands box before releasing a strike.
16th min: The referee is sent across to the monitor to check for a penalty, with Denzel Dumfries catching the foot of Kane, and he points to the spot after a quick look. Controversial!
18th min: GOAL! NETHERLANDS 1-1 ENGLAND (KANE)
Kane smashes his penalty into the bottom corner to level the scores in the semi-final.
23rd min: Somehow England fail to take the lead; Kobbie Mainoo feeds Phil Foden inside the penalty box, and the Manchester City attacker looks to roll the ball over the line, but Dumfries clears. The referee looks at his watch, and it is confirmed that the Dutch defender managed to clear it.
30th min: Dumfries hits the top of the crossbar with a header from the first corner of the match, with Netherlands threatening to score a second.
32nd min: Foden smashes one against the crossbar from outside the box, as the woodwork is rattled for the second time in this match.
39th min: Another smart save from the Netherlands goalkeeper to keep out a low strike from Foden, as the attacker again finds plenty of space outside the penalty box.
45th min+3: HALF TIME: NETHERLANDS 1-1 ENGLAND
65th min: Brilliant save from Pickford to keep out a close-range effort from Virgil van Dijk after the Liverpool defender had met an excellent free kick inside the England box.
68th min: Pickford has to push a deep Cody Gakpo cross behind for a corner, with a couple of Dutch players flying towards the goal. Smart work from the England goalkeeper.
77th min: Pickford is again called into action to keep out a strike from Simons, with Netherlands looking the more likely to score a second in the semi-final.
79th min: GOAL DISALLOWED! England have the ball in the back of the net, as Saka converts a low cross from Kyle Walker, but the offside flag is raised, and the decision is quickly confirmed by VAR.
88th min: Half-chance for England as Cole Palmer picks up a Luke Shaw cross, but the Chelsea attacker's effort was always rising over the crossbar.
90th min+1: GOAL! NETHERLANDS 1-2 ENGLAND (WATKINS)
Incredible scenes, as substitute Watkins comes off the bench to score a second for England.
Palmer releases Watkins inside the Netherlands box, and he turns Stefan de Vrij before picking out the bottom corner with a stunning finish to surely send England into the final of Euro 2024.
FULL-TIME: NETHERLANDS 1-2 ENGLAND
MAN OF THE MATCH - OLLIE WATKINS
In truth, had there been a standout performer during the semi-final, then Watkins would not be receiving this award, but the simple fact of the matter is that was not the case.
There were a lot of solid performers on both sides, with Simons impressing for Netherlands, and Mainoo put in another strong display for England, but this award simply has to go to Watkins.
The Aston Villa forward has had to be patient at Euro 2024, but he had his moment late on, turning De Vrij brilliantly inside the penalty box before picking out the bottom corner.
STANDOUT MOMENT
Watkins's goal could well have been chosen for the standout moment, but the penalty incident on Wednesday night is not something that will be forgotten.
Indeed, the award of the spot kick for England was hugely controversial, as it looked to be a fair challenge between Dumfries and Kane for the ball, with the referee initially happy for the play to continue.
Following intervention from VAR, though, the referee was sent across to the monitor, and he pointed to the spot after a brief look.
Kane scored to make it 1-1, erasing Simons's early goal, and Netherlands will certainly feel that the Three Lions should never have been given the chance to level, as it is seriously doubtful that it was a clear and obvious error from the official which required intervention.
BEST STATS
MATCH STATS
Possession: Netherlands 40%-60% England
Shots: Netherlands 6-9 England
Shots on target: Netherlands 3-4 England
Corners: Netherlands 3-0 England
Fouls: Netherlands 11-6 England
LINEUPS
NETHERLANDS (4-2-3-1): Verbruggen; Dumfries (Zirkzee 93'), De Vrij, Van Dijk, Ake; Schouten, Reijnders; Malen, Simons (Brobbey 93'), Gakpo; Depay (Veerman 35')
ENGLAND (3-4-2-1): Pickford; Walker, Stones, Guehi; Saka (Konsa 90'), Rice, Mainoo (Gallagher 90'), Trippier (Shaw 46'); Foden (Palmer 80'), Bellingham; Kane (Watkins 81')