The Razorbacks' Eric Ferguson missed a potential game-tying 3-pointer, and Brandon Crump was fouled after rebounding. He hit the front end of a 1-and-1 with 12.7 seconds left to secure the final margin.
McFadgon scored 19 points to pace Tennessee, which improved to 12-8 overall and 4-5 in SEC play. He had 15 points in the game's first 13 minutes, hitting 5 of 6 from 3-point range. Arkansas went to a box-and-one at this point, however, and McFadgon scored just four points in the game's final 27 minutes.
Watson chipped in 14 points, 8 rebounds and 6 assists, while Crump finished with 13 points and 10 rebounds.
Tennessee shot 50 percent from the floor and hit 9 of 19 from 3-point range. The Vols also won the backboard battle 40-31. Arkansas shot just 36 percent from the field and made but nine of 26 treys.
Ultimately, though, it was UT's ability to make key plays in the final two minutes that won the game.
This game could've gone either way,'' Buzz Peterson said on his post-game show. ''C.J. hit the big 3 but we were able to get some defensive stops there in the last couple of minutes.
''Our backs were to the wall ... C.J.'s big 3 and the defense we played I thought were the keys to the victory.''
Tennessee raced to a 10-0 lead in the opening minutes, with McFadgon scoring the last six points on a pair of 3s. Arkansas clawed back to go ahead 20-19, however, and led 36-35 at halftime.
The Hogs went up 40-35 early in the second half but Peterson called a timeout, after which UT went on an 11-0 run to grab a 46-40 lead. Arkansas pulled even at 50, but Tennessee got its transition game going during a 9-0 run that produced a 59-50 lead with 7:31 remaining. Unfortunately, the spurt took a lot out of the Vols.
''We had some guys on our team who were really tired,'' Peterson said. ''After that 9-0 run I had some exhausted guys, and I should've called timeout to get some new players in there but I felt like we could play it out with the momentum.''
The momentum vanished in a hurry, however. Matt Jones, who quarterbacks the Arkansas football team, hit a dunk and a 3-pointer to ignite a 15-4 burst that gave the Hogs a 65-63 lead with 3:25 left, setting the stage for Watson's climactic 3-pointer.
The Vols play at Alabama Saturday at 3 p.m.