Watson, 20, will join British numbers two Anne Keothavong and four Elena Baltacha for the singles tournament at Wimbledon after being offered an ITF qualifying place for the Games.
"I got told the news on the court at the end of my training session at Wimbledon," said Watson, who is also appearing in the doubles. "I’m so pleased, I was jumping up and down with excitement when I found out.
"I’m really looking forward to competing for Great Britain in the Olympics and I’ll be giving it my best shot in both the singles and the doubles competitions."
Ukrainian Bondarenko, 27, is suffering from a knee injury which has ruled her out of the whole season. A former world number 19, she has fallen down the rankings and is rumoured to be considering retirement.
Watson, whose rise to world number 67 and British number one came after the qualifying draw for the Games, was already playing in the doubles with 18-year-old Laura Robson, who sits above Baltacha in the rankings but only progressed into the top 100 after a good run in Palermo this month.
Guernsey-born Watson reached the third round at Wimbledon, where she lost to eventual runner-up Agnieszka Radwanska.
World number 96 Robson is next on the standby list if any more players drop out. Baltacha, the former UK number one, has since dropped out of the top 100.
World number four Andy Murray is Britain's only men's singles representative at the Games, although Colin Fleming and Ross Hutchins join Murray and his brother Jamie in the doubles.