The 29-year-old, who has made 46 appearances for the Pilgrims, will now seek first-team football elsewhere having not featured under new boss John Sheridan.
Williams was signed by Peter Reid back in July 2011 and was an ever-present during Argyle's escape from relegation during the second half of last season.
He began this campaign in fine form, scoring three times in 10 appearances, before a stomach injury kept him out until mid-December.
Williams made his final appearance for the Pilgrims in the 4-0 defeat to Port Vale.
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