Former Australia captain Ricky Ponting, dropped from the One-day team last month, was included in the Test squad for the tour of the West Indies on Wednesday.
The 37-year-old batsman's successor Michael Clarke is expected to have recovered from a left hamstring strain, which is likely to rule him out of the limited overs matches which precede the Tests, to lead the side.
Left-arm spinner Michael Beer, who played his one and only Test against England during the ill-fated 2010-2011 Ashes series, was a surprise inclusion alongside finger spinner Nathan Lyon.
Five fast bowlers, Peter Siddle, Ben Hilfenhaus, James Pattinson, Ryan Harris and Mitchell Starc, will travel to the Caribbean but teenager Pat Cummins, who took 6-79 in his only Test to date, was not fit enough to be considered.
Top order batsman Shaun Marsh, who struggled during India's tour over the turn of the year, has been dropped while Brad Haddin is included as one of two wicketkeepers along with Matthew Wade.
Wade and batsman Peter Forrest are the only players in the 16-man squad uncapped at Test level.
"It is anticipated Michael Clarke will be fully recovered and take his place as captain for the first Test match in Barbados, beginning on Saturday 7 April," chief selector John Inverarity said.
"Shane Watson will come back into the Test XI and he could replace Shaun Marsh in the vitally important number three position."
All-rounder Watson, formerly an opener in Tests, played his last Test on the tour of South Africa last year before being sidelined with a calf injury.
Squad: Michael Clarke, Shane Watson, Michael Beer, Ed Cowan, Peter Forrest, Brad Haddin, Ryan Harris, Ben Hilfenhaus, Mike Hussey, Nathan Lyon, James Pattinson, Ricky Ponting, Peter Siddle, Mitchell Starc, Matthew Wade, David Warner.