Your Apple Watch must be signed in to iCloud to allow it to unlock your Mac.
I have been able to unlock my Macbook previously with my Apple Watch, but stopped being able to do so. I have restarted my mac, my phone and watch to no avail. I even unpaired and repaired the watch. Nothing. They all have wifi/bluetooth enabled, etc.
MacBook Pro running Monterey 12.2.1
iPhone 11 15.3.1
Watch OS 8.4.2
Is this a bug? Anything else I can try?
Apple Watch Series 5