The board concluded that Watson remained an undue risk and could not yet be released.
Watson, who has spent more than 22 years behind bars after being sentenced to life in prison with a minimum non-parole period of 17 years for the 1998 murders of Olivia Hope, 17, and Ben Smart, 21, will come back before the board next November.
Today, the Parole Board released its full decisions in declining parole.
A 2016 Parole Board decision identified the risk factors relating to Watson who has always denied killing, or even ever meeting, Hope and Smart.
On a psychopathy checklist, the board noted Watson fell within a group of offenders "who show an elevated rate and speed of recidivism, particularly relative to violence".
After the 2016 decision, the board asked Corrections to consider what appropriate treatment might be provided to Watson.
The board felt that Watson's denials should not be seen as an insurmountable problem.
"Unfortunately, Mr Watson has not been able, over an extended period, with the help of psychologists to identify his treatment needs and start treatment," the board said in its reasons released today.
"Corrections believe that they have provided Mr Watson with reasonable opportunities to identify treatment needs and begin treatment.
"Mr Watson feels that they have not been prepared to help him and have insisted that he confess to the crime or have placed other impediments in his way."
Now, the board has asked Corrections to see Watson "urgently".
The fact that Watson has a new appeal before the Court of Appeal "should not be an impediment", the board says.
"Hopefully Corrections can then identify treatment needs and hopefully a beginning of that treatment in the foreseeable future."
Watson and his supporters - the case has long divided public opinion – were given fresh hope in June this year after Justice Minister Andrew Little announced that Governor-General Dame Patsy Reddy had referred his case back to the Court of Appeal for a new hearing.
It came after an investigation by former High Court judge Sir Graham Panckhurst QC raised concerns about forensic evidence used to convict Watson.
"The primary basis of his application was that the DNA evidence linking two hairs removed from a blanket seized from Mr Watson's boat with Ms Hope was unreliable," the Ministry of Justice said.
An earlier appeal to the Court of Appeal in 2000 was unsuccessful, as was his subsequent application for leave to appeal to the Privy Council.
Watson then applied for a royal prerogative of mercy in November 2008.
That was assessed by Kristy McDonald QC and also ultimately declined by Governor-General Sir Jerry Mateparae in July 2013, on the advice of the then-Minister of Justice Judith Collins.
Watson has had good conduct and behaviour in prison and been working as a lead carpenter, as well as a prison painter - a sought-after job because he can move about the prison.
He also has a partner on the outside, the board was told earlier this month.
Watson said he had been in a steady relationship for the past 16 years.