Preselection for the party's three senate positions was opened yesterday ahead of this year's Federal election, and nine candidates had emerged before the close of nominations last week.
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Senator Paul Calvert had earlier flagged his intention not to recontest his position, leaving three positions open.
It was also understood that forces within the party believed Launceston-based Senator Watson, 70, should step aside in favour of new blood.
Senator Watson survived a similar campaign five years ago, and earlier this year said it was farcical for a party that had campaigned against age discrimination to push him aside.
The Liberal Party preselection committee, comprising 61 members, met at the Inveresk Tramsheds in Launceston yesterday to vote.
North-West Coast's Senator Richard Colbeck came in strong in position one, followed by lawyer and public relations director David Bushby in position two and Senator Calvert's chief-of-staff Don Morris in position three.
Party State president Dale Archer said he believed the three candidates would prove a winning formula.
"We see that as an exceptionally good team to take into the next election," he said.
"They come from diverse backgrounds and I was particularly pleased to see Senator Colbeck preselected at the head of the ticket. He can continue the exceptionally good job that he's been doing for the people of Tasmania since 2001."
Mr Archer said Senator Watson had provided years of valuable service and would be remembered for his dedication.
"Senator Watson has been a public figure in Tasmania, a senator for the Liberal Party for almost 29 years and that is something that should be recognised," Mr Archer said.
"He's done an exceptionally good job for the Liberal Party and the people of Tasmania ... As I understand it he is actually the longest- serving current sitting senator and I think that is a real achievement for him."
