The Hawks sent Williams to the Nuggets in exchange for a traded player exception and the draft rights to 2005 draft pick Cenk Akyol.
With the extra roster spot, the Hawks signed Gary Neal to a 10-day contract. Neal had playing for the Texas Legends in the NBA Development League.
Williams, a 13-year veteran, never reported to the Hawks after he was traded to Atlanta by the Cleveland Cavaliers in the Kyle Korver deal on Jan. 7. The veteran, who won a title with the Cavs last season, had surgery on his left leg on Oct. 12 and made it clear that he wasn't going to play this season.
According to multiple media reports, Williams is expected to be waived by the Nuggets.
Akyol, who plays professionally in Turkey, was drafted by Atlanta in 2005 and has never played in the NBA.