The 34-year-old won 93 caps for Wales during a glittering international career, which also saw him collect a Grand Slam and appear on two British and Irish Lions tours.
At club level, Williams won Premiership and Champions Cup titles with Saracens, as well as the PRO14 with the Scarlets.
Williams retires while on the books of the Newcastle Red Bulls after making just three appearances since arriving from Japanese side Kubota Spears last year
Announcing his retirement from the game, he said: "I've loved my time as a professional rugby player, during which time I've made so many great friends and enjoyed incredible memories.
"Unfortunately, injuries have meant I have not been able to contribute on the field as much as I would have liked during my time in Newcastle, but I would like to thank the club and our supporters for making my family and I feel so welcome during our time in the North East.
"It's a great club with a really exciting future, and despite my own playing opportunities being limited due to injury I hope I have been able to contribute positively behind the scenes towards the continued growth of the squad."
Sporting general manager Neil McIlroy said: "Liam will rightly be regarded as one of the best players of his generation.
"He has been a consistent winner at club and international level for more than a decade, and despite injuries limiting his playing opportunities during his time in Newcastle, he has been a model professional in supporting and developing the players around him.
"He has been part of the first wave of Newcastle Red Bulls players, who will always be welcome here, and will hopefully remain strong ambassadors for our club and its ambitions.
"I have got no doubt that he still has a lot to offer the game, should he wish to remain in rugby, but first and foremost we just want to congratulate him on an outstanding career and wish him and his family all the best for whatever lies ahead."
Wales legend George North has brought the curtain down on his professional career, saying he has fulfilled his "childhood dream" after years at the top of the game.
SA Rugby CEO Rian Oberholzer has described it as "tragic" if the British and Irish Lions no longer tour South Africa on their established 12-year schedule.
Rugby Australia has confirmed it is debt-free after the British and Irish Lions tour helped drive a record 70.6 million dollar operating surplus for 2025, marking a major financial turnaround for the union.
Wales ended their Six Nations campaign on a high with a deserved 31-17 win over Italy in Cardiff on Saturday.
