The 35-year-old flanker has made 83 European appearances and lifted the Amlin Challenge Cup last year as the Blues defeated Toulon 28 v 21 at Stade Vélodrome.
"I've signed a year extension and happy that it's all done and dusted," said Williams.
"It's where I wanted to finish off and I've made no secret about that."
"I'm over the moon that the club have come to an agreement that I will have my last season here."
"Peter Thomas, David Young and Bob Norster have all worked hard to make this happen and I'm glad that it has all been sorted out."
"In fairness Dai never said that he wanted to release me and I totally understood the clubs reasons for not doing things immediately."
"It wasn't a great couple of weeks, with the speculation and not being in the Wales squad, but I've tried to keep my head down and carried on playing for the region."
"I was fortunate that the Blues had some big Magners League games so I could concentrate on them."
"I've been here since 1999, so I didn't really want to go anywhere else, I wanted to finish here, so I'm glad I've been given that opportunity."
"I did weigh everything up, whether to go to play in England or France or completely retire from the game in June."
"However, I'm still feeling well and playing well, and think I have something to offer the Blues next year."
Speaking of Martyn's announcement, Cardiff Blues Director of Rugby, David Young, added,
"I've repeatedly said that Martyn Williams wasn't definitely leaving the club."
"What I did say was, I would do everything within my power, with the support of Peter Thomas, to keep Martyn here for another year, so I'm delighted that he has agreed."
"Nobody recognises more than me the value and the commitment Martyn has given to the Blues and that should be repaid from us as well."
"Hopefully Martyn will have a great season to finish off his career next year."