Running seventh, Waters was in a league of his own in the single-lap dash. He was the only driver to break under the 2m04s barrier, his 2m03.559s gapping then-pacesetter Chaz Mostert by 0.45s.
Mistakes from the two Red Bull Holden drivers took them out of the running for pole, while even one-lap master Scott McLaughlin couldn't get within four-tenths of Waters.
When provisional polesitter Lee Holdsworth failed to switch his front tyres on, pole was sealed for Waters and co-driver Will Davison.
"That was absolutely awesome," said Waters. "I knew the car had something special in it, I just had to put it all together.
"I made a few little mistakes, but the car was just hooked up."
McLaughlin was best of the rest in second, he and Mostert separated by just 0.01s over the 6.213 kilometres.
Nick Percat was the biggest mover in the Shootout, the Brad Jones Racing driver turning 10th in regular qualifying into fourth on the grid.
Shane van Gisbergen went three spots backwards thanks to a couple of small mistakes, he and Garth Tander set to start from fifth, while Holdsworth dropped back to sixth, complaining of a lack of front grip after his lap.
Anton De Pasquale and Fabian Coulthard were seventh and eighth, followed by James Courtney in ninth.
Jamie Whincup, meanwhile, will start the race from 10th after binning his lap at The Chase. He had been within 0.08s of then-pacesetter Mostert at the second sector, only to lock his rears and run wide just two corners from home.
"We underestimated the wind," he said.
"The wind changed and there was a fair tail wind down Conrod. We're normally pretty good at that, but I reckon that's what caught us out.
"I'm disappointed in myself, I feel like I let the team down a little bit today. I need to make up for it tomorrow."
The 2020 Bathurst 1000 starts at 11am AEST tomorrow.
Bathurst 1000 - Shootout results:
|1||6||Will Davison||Ford Mustang GT||2'03.559|
|2||17||Tim Slade||Ford Mustang GT||2'04.002||0.442|
|3||25||Warren Luff||Holden Commodore ZB||2'04.010||0.450|
|4||8||Thomas Randle||Holden Commodore ZB||2'04.247||0.688|
|5||97||Garth Tander||Holden Commodore ZB||2'04.451||0.891|
|6||5||Michael Caruso||Ford Mustang GT||2'04.676||1.117|
|7||99||Brodie Kostecki||Holden Commodore ZB||2'04.768||1.209|
|8||12||Tony D'Alberto||Ford Mustang GT||2'04.853||1.294|
|9||44||Broc Feeney||Ford Mustang GT||2'05.354||1.795|
|10||888||Craig Lowndes||Holden Commodore ZB||2'06.394||2.834|
|View full results|