Watford led the Blazers with 15 points and 10 rebounds before suffering the injury with 3:01 remaining in the 115-98 loss. He fell to the court and grabbed at his left knee after awkwardly stepping on the foot of Houston's Dennis Schroder. Watford was helped to the locker room by teammates and coaches, unable to put any weight on his left leg.
He underwent an MRI, and the Trail Blazers said he would be reevaluated after sitting out a week.
Watford had scored at least 10 points in 12 of 13 games in March, upping his season average to 7.4 points per game.
The Trail Blazers also lost forward Greg Brown to an eye contusion in the first quarter. Coach Chauncey Billups said after the game that Brown was seeing an eye doctor to determine the severity of the injury.
The Associated Press contributed to this report.