Watson, 58, was previously named a person of interest in the case. He was arrested in Caldwell, Idaho, on an outstanding warrant for parole violation, said Lakewood police spokesman Steve Davis.
Miller was found dead in a Lakewood office building by a cleaning crew on March 5. Her SUV and credits cards were missing.
An autopsy on Miller showed she had been strangled. Her wrists had ligature marks and she had bruising consistent with a sexual assault, the indictment said.
According to the Grand Jury indictment, Watson became a person of interest in the case after he was identified on a surveillance camera using Miller's credit cards just hours after she was killed.
The cards were used at a King Soopers, Ross, Walmart and Sapp Brothers Truck Stop.
Detectives then got a tip from woman staying at a Best Inn on Quebec Street who had recognized a man staying there as Watson from a photo she saw on news stories about Miller. The woman gave detectives a cell phone number that she said was Watsons, the indictment said.
Detectives were able to track the cell phone to a trash bin in the 2800 block of Downing Street in Denver. Surveillance video from a local business showed a black SUV matching the description of Millers. "Warren Watson can be seen putting a black trash bag in the dumpster," the affidavit said.
Police searched the trash bin and found the bag. Inside it was Miller's purse, phone and ID along with a blue shirt, tan pants with blood stains, black shoes, a silver coffee pot, zip ties, white torn panties with blood stains and an airsoft pistol package, the indictment said.
The next day Watson boarded a flight to Idaho. The same day, police found Miller's SUV at the Sapp Brothers.
Two days later Watson was arrested in Idaho on a parole violation. Lakewood detectives traveled to Bosie and interviewed Watson, who admitted killing Miller.
"Watson admitted to pulling out what he described as a fake gun and telling Claudia Miller to get down on the floor," the indictment said. "He admitted to tying her up, going through her purse and taking her money and her credit cards."
Watson also admitted he "intended to have sex with Claudia Miller at some point."
Among the 18 counts Watson faces are three counts of first-degree murder, three counts of sexual assault, seven counts of identity theft and two robbery charges.