The American maid was allegedly employed at the Harry Potter star's north London home.
The housekeeper, who started working for Emma in New York last year, was stopped by immigration staff, who asked how she intended to fund her stay in Britain, according to the Mail.
Prior to her time in London, Watson had been living in the United States while she studied at Brown University.
Border officials started the investigation after receiving a complaint that the maid was paid to help the actress at her Islington home, and subsequently made trips to London.
Following the incident, UK Visas and Immigration have now launched a probe after receiving a complaint that she frequently travelled to London on and off and was paid to help the actress at her Islington home.
The former child star could face up to $17,000 in fines if authorities discover that her housekeeper was employed without proper work permits. She has yet to comment on the allegations.
And while the Home Office cannot comment on individual cases, an insider at the department said: "An allegation has been received and processed and has been allocated for further action."
Having graduated last month, the actress is now thought to be based in London, and is set to attend the Prime Minister David Cameron’s ‘Cool Britannia’ party at Downing Street on June 30th, according to a report by Express.
According to the newspaper, it is alleged that the maid spent three months in Britain between September 2013 and February 2014.
Watson recently completed shooting Alejandro Amenabar's forthcoming thriller 'Regression', about a father accused of a crime he has no memory of committing. It co-stars Ethan Hawke.