The team issued a statement Monday evening that the 35-year-old is announcing his retirement. The Grizzlies signed Williams on Feb. 7, after he was released by the Orlando Magic.
Williams missed the final 17 games of the season with lower back soreness.
The 6-foot-1 guard finished with career averages of 10.5 points and 5.9 assists. He is the Grizzlies' all-time leader in assists with 2,069.
Williams played for the Grizzlies twice and played for the Sacramento Kings, the Miami Heat and the Magic. He was the starting point guard on the Heat's championship team in 2005-2006.