The altercation happened on a 2005 edition of the show, when the Irish judge said to an animated Osbourne: "Are you taking Ozzy's drugs?"
Irritated, she replied "Don't bring my husband into this!" and threw two glasses of water over him.
Osbourne will again join Walsh at this year's Judges' Houses stage of the ITV competition.
When asked by The Xtra Factor this weekend how he would get back at her, the 60-year-old jokes: "Oh I know what I would do... I would rob one of her dogs! That's what I would do!"
Walsh is also quizzed on Jedward. He refuses to be drawn on which of the pair is his favourite, but reveals that he "can't really" tell them apart.
He is also philosophical about the fact that he has only won The X Factor once, despite being the longest serving judge.
He notes: "Well, I don't know. I have had a lot of people that have done very, very well. I mean, JLS really should have won."
The Xtra Factor airs on ITV2 at 9.10pm on Saturday and at 9pm on Sunday.
Watch footage of the famous Louis Walsh and Sharon Osbourne water fight below: