The initial attempt to turn it on rebuilds the scaffold entries and keys that are required to be used by the system, and then the second attempt to turn it on uses those now-rebuilt keys and plists to do the job. This process resets all of the parts of that system to default. What Apple is doing here is using the iCloud Keychain to provide key-based access to your workstation using custom invisible keys that are paired between Watch and Mac, and then verifying that Watch is close enough to the Mac to reasonably unlock it, using time-of-flight Wi-Fi signal checking. Many thanks to Alex Narvey of Precursor in Winnipeg for the problem exercise, and LongZheng from the MacRumors forums for identifying the solution initially. Once again, you can unlock your Mac with your watch. Okay, now you’re ready to set up your Watch. It’s going to fail, and that is expected in this case. Make sure you’ve enabled two-factor authentication for your Apple ID. Check the box to unlock your Mac with your Watch. Go back to System Preferences > Security & Privacy > General Tab.Go back to the Finder, and from the Go menu, select Go to Folder… (or press Command-Shift-G) and enter this file path: ~/Library/Sharing/AutoUnlock.Now, search for “AutoUnlock”, and you’re going to find four references.If you’re like me, you’re going to see about 50-60 keys. From the View menu, click Show Invisible Items. It’s located in your Applications folder, in the Utilities folder inside of it.
Either way, if you have found yourself unable to unlock your Mac with your Apple Watch after upgrading to WatchOS 7, here’s how to fix it: As with all things, new versions of software causes bugs.