The 21-year-old student wrapped his arms around Watson as they took a dip in the sea together before enjoying a stroll on the beach.
"They didn't have a care in the world. Matt was very protective of Emma - often putting his arm around her. He was being a gentleman the whole time. He is clearly very much into her, but then who wouldn't be, she is one of Hollywood's hottest stars? They couldn't stop giggling and smiling the whole time," an onlooker said.
Watson is currently studying English at Brown University in Providence, Rhode Island, but the star attended Worcester College, Oxford for the 2011-12 academic year.