Second in the general classification,14 seconds behind leader Aaron Donnelly after three days of racing in the 60th Jayco Herald Sun Tour, Watson attacked the final 93-kilometre course featuring two gruelling climbs up Arthurs Seat with the know-how of a pro.

The truth is that he knew the course like the back of his hand. While Watson was based in Italy last year, anointed as a future star by the Australian Institute of Sport, he recently returned home to Frankston after losing his place in the national development program for 2013.

To help deal with his disappointment, the Jayco VIS Apollo rider, who is trying his luck again in Europe this year with an Italian amateur team, has spent hours training on the Mornington Peninsula's biggest climb twice a week.

Nathan Earle might have claimed the stage that finished at the top of Arthurs Seat, but Watson, who made up sufficient ground in the overall standings by crossing the line 55 seconds later in 21st place, was the biggest winner.

"This means so much," he said. "I was fuelled by a bit of anger and disappointment being left out of the national program, so I'm happy I can show I'm a real force in Australian cycling."

Dave Sanders, the Victorian Institute of Sport coach who has mentored Watson since he was 15 and has recently motor paced him up Arthurs Seat, disagreed with the decision to cut the young rider from the national development program this year.

Sanders fought back tears on Sunday night describing the meaning of his major win.

"Cal has had a couple of setbacks - this is how you show your stuff," he said. "This is how your demonstrate your ability - you don't talk with words."

Earle, a teammate of Donnelly's at Huon Salmon-Genesys Wealth Advisers, said his stage win was bitter-sweet because the team had lost the yellow jersey. But Donnelly, who wore the leader's jersey for two days, said he gave it all he could and the best man won.

Gerrans, lead rider in the star-studded Australian national team that failed to claim a stage in a race where the under-23 riders shone, led the leaders up the second climb of Arthurs Seat.

But the Orica-GreenEDGE pro, who wants to defend his national title in the road race next week in Ballarat, ultimately finished 20 seconds behind Earle and eighth overall.

Gerrans' teammate and fellow GreenEDGE rider, Simon Clarke, was fourth to cross the line but could not close the two-minute 45-second gap in the overall standings between himself and Donnelly.

The race was wide open for the last 93-kilometre stage that began at Moonah Links. While three under-23 riders held more than a two-minute advantage over fourth-placed Luke Davison (SASI Cycling P/B Feelgood Fitness) - the winner of the second stage - Gerrans and Clarke loomed large.

They were well set up for the critical final assault after their veteran teammate, Stuart O'Grady, tried to exhaust their rivals by driving a lead group of 14 riders to the bottom of the climb. The group of 14 had a lead of one minute 47 seconds on the peloton at the 60-kilometre mark.

Watson said Gerrans, whom he first met through the VIS, pulled him aside before Sunday's twilight stage to let him know he believed he could win it.

"This morning he came and had a chat to me and said 'look mate, you can win this Tour'," Watson told Fairfax Media. "He supported me out on the road today and gave me a few tips on what to do and what not to do and that just shows what a champion he is. I have a lot of respect for him."