The visitors were reduced to ten men early in the second half, at which point it was only 2-0, and from then on Ipswich almost scored at will, before taking pity on their opponents in the final 15 minutes.
Walters and David Wright put Ipswich in charge at the break, and the game was over three minutes into the second period when substitute Danny Haynes was felled by Bradley Orr for a penalty which saw the Bristol man sent off and Tommy Miller buried the spot-kick.
Walters then bagged two more either side of a Pablo Counago strike and in the end Ipswich could have reached double figures, such was their dominance.
There was no sign of the drama to come early on, with City starting reasonably well, but Town went ahead on five minutes when Walters collected an Owen Garvan pass, came inside two defenders and struck a deflected shot home from the edge of the box.
David Noble and Darren Byfield tried their luck from range, before Town doubled their lead on 15 minutes when Alan Lee crossed for full-back Wright to dive and head home from six yards.
Bristol keeper Adrian Basso saved from Lee twice and Counago, while the visitors saw Marvin Elliott head over from a deep Orr cross, before their best chance saw Michael McIndoe tamely lob the ball straight to Neil Alexander when a long ball dropped to him with the keeper well off his line.
Any chance the visitors had was extinguished immediately after the break when Haynes, on for top-scorer Lee, was brought down after racing clear and Miller buried the penalty beyond Basso's left hand.
Town made it 4-0 on 55 minutes with a goal which began on the edge of their own box with Billy Clarke winning possession. He found Garvan who played in Walters and his fierce angled drive beat Basso on his near post.
Town broke clear for a fifth ten minutes later when Walters intercepted and sent Counago clear down the right and the Spaniard cut inside Liam Fontaine before passing the ball into the net off the far post.
Walters was denied his hat-trick by a low Basso save, but collected his third on 74 minutes when Counago played him in over the top and held off his man before slotting home with ease.
Walters was replaced a minute later to a richly deserved standing ovation and Ipswich took their foot off the gas at that point, no doubt much to the relief of the Bristol players.
Ipswich did spurn one great chance to score a seventh when Counago played in Clarke but his tame shot was parried by Basso and sub Brian Wilson hooked it off the line before fellow replacement Gary Roberts could tap it in.