Williams took on the Ulster job in December 2007, taking the reins from caretaker coach Steve Williams who stood in following Mark McCall's resignation the previous month.
The Sydney native, who previously coached Leinster, Ireland 'A' and Scotland, successfully brought through a number of young players during his stint with Ulster, including Darren Cave, Ian Whitten and Niall O'Connor who are poised to make their Ireland senior debuts this weekend.
Back rower Stephen Ferris rose to prominence under Williams, starring in Ireland's Grand Slam-winning campaign alongside his Ulster team-mates Rory Best and Paddy Wallace.
Ferris has gained further recognition as Ulster's only 2009 Lion, but an injury to Jerry Flannery could yet see Ulster captain Best, another player who has been helped by Williams' guidance, join Ferris in the British & Irish Lions squad.
On Williams' watch Ulster have lacked the consistency to challenge for honours but the foundations are there, with an increasing number of young players pushing through, for the province to get back in contention for silverware in years to come.
They were ninth and eighth in the Magners League in his two seasons in charge, while they also failed to make it out of the Heineken Cup's pool stages.
Amongst their best results this season were derby wins over Connacht (53-13) and Munster (37-11) and their determined defeat of Harlequins (21-10) in the Heineken Cup in January.
A statement from Ulster Rugby read: "We would like to thank Matt for his efforts and the contribution over the past 17 months, and wish him and his family the very best for their future.
"Ulster Rugby will now begin a search for Williams' successor and will make no further comments on the process at this stage."
Looking back on his time at Ravenhill, Williams added: "I am delighted with the progress of the Ulster players - the team is still in the very early days of their development.
"They have had some excellent victories. There were outstanding performances in this year's Heineken Cup and the win against Harlequins and the defeat of Munster at Thomond Park in the Magners League are the stand-out matches.
"We lost too many close games due to our inexperience but that will change with time.
"There needs to be patience and understanding that this team will grow into a powerful outfit in years to come.
"I am deeply disappointed that I will not be there with them on the journey.
"From Stephen Ferris, Paddy Wallace and Rory Best through to Darren Cave, Ian Whitten, David Pollock and Niall O'Connor, I was privileged to coach Ulster and witness the potential of their talent.
"I have enjoyed every day here in Ulster and am deeply sorry to leave in these circumstances. I will be watching out for them next season, but from Australia."