The former All Black was set to be named in the Kiwis team for Friday's Anzac Test against Australia in Canberra after making his return to rugby league with Sydney Roosters this season.
However, Williams aggravated an existing injury to his right knee in Friday's game against his old club Canterbury Bulldogs and he has been ruled out for seven days.
"Roosters medical officer Dr John Orchard and orthopaedic surgeon Dr Tim Musgrove have discussed the injury with the New Zealand medical team, headed by Dr Simon Mayhew, and consequently Sonny has been ruled out of this Friday's Test against the Kangaroos," a Kiwis spokesman said.
The loss of Williams is not the only worry for the Kiwis selectors, who will name their 19-man squad later on Sunday.
Already without stand-off Benji Marshall, his logical replacement, New Zealand Warriors half-back Shaun Johnson, suffered a knee injury during his side's defeat by Canberra on Saturday night while back-rower Jeremy Smith is facing the possibility of suspension after being placed on report for a head slam in Newcastle's win over Penrith.
Meanwhile, Tony Kemp has resigned as New Zealand's high performance manager. Kemp was last week suspended from his role while a disciplinary investigation took place.
NZRL chief executive Phil Holden said in a statement: "Tony leaves the NZRL after three years to pursue new opportunities...he created a legacy that will endure for some time."
Kemp's role for Friday's Test will be taken up by the team's assistant coach Tony Iro, the former Wigan centre who will also take over as head of high performance.
Kemp, who played in England for Leeds and Castleford and coached Wakefield, played 25 Tests for the Kiwis and was in charge of the New Zealand Warriors as coach for 37 games before being sacked in 2005.
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