The former Labour deputy leader said the party needed to look beyond Mr Corbyn’s role in the landslide defeat, and focus on the reasons why it had not won an election for 15 years.
Mr Watson told the E&S: "My fear is that everyone will hang Labour's defeat on him personally, and that’s wrong.
"Actually, Labour Party members who voted for him and the MPs who backed the manifesto programme have to share in the responsibility for the defeat.
"As a party that believes in democratic collectivism, we have to collectively accept our responsibility for defeat as well as success."
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Former West Bromwich East MP Mr Watson, who stood down before the election, said the party’s manifesto had contributed to the election result, saying: "In the lifetime of a parliament, no government could possibly have implemented all the things that were included in it.
"There wasn't the time. I showed we had not set out priorities, and voters got the impression that it was unrealistic and didn't buy into it."
He also said Labour lost many voters who were “infuriated” that the party was not giving them a clear position on Brexit.
Mr Watson, who pushed for a referendum on the Conservatives Brexit deal, said: “It was my honest opinion that it is in the country's best interests to stay in the EU, and I thought that was the fairest way of dealing with the issue.
"I think we could have made the case that it was the most democratic option. We could have won the argument but it would have taken months of hard work on the ground to make our case to the public.
"In the end we had a public row about it and infuriated people. We looked like we weren't united, which of course we weren’t.
“The result was that Labour was perceived to have ridden two horses, and we were punished for that.”
Time to finally deal with anti-Semitism
Meanwhile Mr Watson has urged Labour’s next leader to act swiftly and decisively to deal with allegations of anti-Semitism within the party.
He said he was saddened by his party’s failure to tackle the issue, which is currently the subject of an inquiry by the Equality and Human Rights Commission (EHRC).
Mr Watson has been a strong critic of the Labour leaderships handling of anti-Semitism cases, a stance which led to accusations from allies of Jeremy Corbyn that he was being a divisive figure.
He said he was looking forward with "dread and fear" to the EHRC report, adding: “Hopefully they will be able to explain why institutionally, we have not managed to deal with anti-Semitism quickly enough, and what we need to do to deal with this matter in future.
"The next leader will only have a very short period of time to act decisively if they are going to have any chance of rebuilding trust with the British Jewish community, who I know were literally fearful of Labour getting into power.
"I never want us to get into that position again.
"I did my best, both privately and publicly, but I didn't have the votes on the NEC to change things and my public interventions were seen by some as hostile acts."
Allegations of anti-Semitism and bullying have dogged Labour since Mr Corbyn became leader in 2015.
Last year Mr Watson called for automatic exclusions to be brought in for members accused of anti-Jewish racism.
It followed a Panorama documentary featuring claims from whistleblowers that attempts to deal with the issue had been undermined by senior party figures.