The 28-year-old had a successful career in his homeland, making 37 Super Rugby appearances for the Auckland Blues during a four-year spell. He also played for North Harbour under new Ulster coach Mark Anscombe in the Air New Zealand Cup.
Williams joined Munster ahead of the 2008/09 campaign and helped them secure the Magners League title in his debut season before moving to Italian franchise Aironi Rugby.
Director of Rugby, David Humphreys, believes Williams will prove to be a major success in Belfast as his side targets success in the Heineken Cup and PRO12. "Nick was a stand-out player during his time at Aironi and he will add a great deal to our squad. His addition means there will be real depth right across the back row and this is vital, given that Stephen Ferris is under an IRFU Player Management Programme.
"Mark Anscombe brought him out of club rugby in New Zealand and believes he can make a huge impact here at Ulster. He is an excellent ball carrier and is a very physical in defence," added Humphreys.
Ulster have been drawn in Pool 4 of next season's Heineken Cup along with Northampton Saints, Glasgow Warriors and Castres Olympique.