Germany's Bild newspaper reported earlier this month that UEFA President Michel Platini wanted to make the change in 2015 but Europe's governing body has never confirmed the plan.
Watzke stood up for the much-maligned Europa League, saying Dortmund had made 13 million euros ($17.08 million) from it when they took part last season, even though they were knocked out in the group stage.
"It is complete nonsense," Watzke told Germany's Sport Bild magazine.
"Why should a premium product such as the Champions League be artificially watered down? I have liked almost everything that Platini has done so far, but now he is completely on the wrong path.
"The fans don't want to see the third-placed team from Lithuania."
Watzke added: "Marketing is not everything. The Europa League has generally been accepted by the fans. We received 13 million euros from taking part one and a half years ago. That is a significant quantity of money.
"Of course, the financial difference between the Champions League and Europa League is very big, but could be reduced by solidarity contributions from the Champions League to the Europa League."