Williams, the record try-scorer for Wales with 58 tries in 87 matches, retired from international rugby after the World Cup last year and brought an end to his domestic career with Ospreys at the end of last season.
The 35-year-old, who will play in Japan next season, told the Press Association: "I have been lucky enough to have had a fantastic career and what a great way to finish.
"I am very humbled by the fact I am being regarded in this way - I never thought I would receive an honour such as this and it is a fantastic end to my career."
Williams, Wales' most-capped winger, made his international debut in 2000 and was part of the Grand Slam-winning side in the 2005 Six Nations.
He twice toured with the British and Irish Lions, to New Zealand in 2005 and South Africa in 2009, scoring two tries against the Springboks.
Among the major rugby-playing nations, only Australia's David Campese has scored more international tries.
An MBE also goes to Margaret Alphonsi, a star flanker for the Saracens and England women's rugby teams.
Alphonsi, known as 'Maggie the Machine', reached 25 international tries for England against world champions New Zealand at Twickenham last November.
She works as a talent development officer for rugby union in London and the south-east.