Alisher Usmanov, whose mining and telecoms companies have earned him $15billion according to Forbes, paid a record $4.1million for the medal when it was auctioned in New York last week.
But now he says he will hand the medal back to Watson, who was awarded it in 1962 alongside Francis Crick and Maurice Wilkins after discovering the double helix structure of DNA.
Russian billionaire Alisher Usmanov, worth an estimated $15billion, bought the Nobel Prize medal from James Watson (right) at auction last week for $4.1million, but plans to had it back
James Watson won the prize in 1962 with Francis Crick and Maurice Wilkins for discovering the double helix structure of DNA, but said he was forced to sell it after losing his income following racist comments
Usmanov said: 'In my opinion, a situation in which an outstanding scientist has to sell a medal recognising his achievements is unacceptable.
'James Watson is one of the greatest biologists in the history of mankind and his award for the discovery of DNA structure must belong to him.'
Watson became the first living recipient of a Nobel medal to auction the trophy when he lost most of his income and reputation after claiming that white people are smarter than black people.
In a 2007 interview with The Sunday Times, he said he was 'gloomy about the prospect of Africa' because 'all our social policies are based on the fact that their intelligence is the same as ours, whereas all the testing says not really.'
Those comments lead to him being dropped from company boards, forced him to retire from Cold Spring Harbor Laboratory in New York, and reduced his income to his academic work alone.
Before selling the medal Watson said he wanted to use the money to re-enter public life after becoming an 'unperson', and buy a Hockney painting.
He said he also planned to donate part of the windfall to the universities of Indiana, Chicago and Cambridge which helped 'nurture' him.
Watson (far right) is applauded by Sweden's King Gustaf Adolf after receiving the Nobel Prize. He became the first living recipient to auction the medal when it sold at Christie's in New York last week
Mr Usmanov, who was named as Britain's wealthiest man in 2013, added: 'Dr Watson's work contributed to cancer research, the illness from which my father died.
'It is important for me that the money that I spent on this medal will go to supporting scientific research, and the medal will stay with the person who deserved it.'
Crick and Watson won the Nobel Prize in Physiology or Medicine after discovering the double helix structure of DNA, though their research would prove controversial.
Their discovery drew heavily on the work of Rosalind Franklin, whose DNA crystallography photographs of the double helix were shared with them without her permission.
Her work is widely accepted to have greatly helped the pair map the double helix structure of DNA, and explain how genetic information is coded on to it.
Franklin, who was working at University College London, died of ovarian cancerin 1958, four years before the Nobel Prize was awarded, discounting her from the selection.
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