One of the cool new features of macOS Sierra and watchOS 3 is login in to your Mac with the Apple Watch automatically. Here are the reason why it is not working for you.
Apple released macOS Sierra on September 20. The new operating system update comes with a long list of new features include Siri. One of the flashy new features is Auto Unlock with Apple Watch. You just sit down in front of your Mac and boom, you are logged in. A lot of Apple Watch owners are though not getting the "boom" experience. The Login with the Apple Watch does not work.
Auto Unlock Compatibility
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There are several reasons why the Auto Unlock is not working after you have installed macOS Sierra. Apple has been open about the fact that only Mac computers made 2013 and later are compatible with the Auto Unlock feature. Why 2011 MacBook Air, 2011 Mac mini, 2012 MacBook Pro and 2012 iMacs are not compatible is unclear. These models have Bluetooth Lower Energy support. You can check if your Mac supports Bluetooth LE, by checking the system configuration in the System Report. Under Bluetooth look for LMP Version: if its lower than 0x6, you have no Bluetooth Low Energy support.
Auto Unlock Requires Two-Factor Authentication
While the hardware compatibility is an easy to understand requirement to be able to unlock your Mac with the Apple Watch, the requirement for Two-Factor Authentication is where Apple is losing a lot of users.
If you already used Two-Step Verification on your iCloud account, you need to disable it. Then you need to setup Two-Factor authentication on your iCloud account. To disable Two-Step verification go to appleid.apple.com. Under Security turn off two-step verification.
To setup Two-Factor authentication its best to use an iOS 10 device. Under Settings got to iCloud and select Your Account. Under Password & Security you find the switch to turn on Two-Factor authentication. Follow the instructions on your screen.
If you cannot find the Two-Factor option in your iCloud account, that means Apple has not made this security option available to you yet. This has many Apple users stumped around the world. Even if you have at least one compatible device (iOS9 up, OS X El Capitan and up), you still might not have access to it. There is no clear statement from Apple on availability of Two-Factor authentication by region.
For me personally the Auto Unlock feature is out of reach as I am still running strong on a 2011 iMac. I am also not sure yet if I will upgrade to macOS Sierra. I am holding off until I am sure there are no issues running macOS Sierra on a 2011 iMac.