The Hawks announced before Saturday night's game against San Antonio that Williams tore the anterior cruciate ligament in the knee in Friday night's loss at Brooklyn. The tear was found when Williams was examined Saturday by Dr. Michael Bernot in Atlanta.
"It's certainly devastating to us to lose Lou," Hawks coach Larry Drew said.
Williams, a guard in his first season with the Hawks, is averaging 14.1 points.
The injury came in the second quarter when Williams stole the ball and was driving to the basket with around 7 minutes left. His leg appeared to give out as he tried to plant and go up for the shot. He limped out of bounds behind the basket and was eventually taken to the locker room area.
The loss of Williams is a blow to an Atlanta team which has lost seven of nine following a strong start. Williams has joined starters Devin Harris and Jeff Teague to make the backcourt a strength for the team.
Drew said the loss of Williams is especially difficult to overcome because the 6-foot-1 Williams played both guard positions.
Drew said rookie shooting guard John Jenkins, averaging only 4.1 points per game, will see more playing time.
Kyle Korver is starting at shooting guard against the Spurs. With the Hawks now limited to Harris and Teague at point guard, Drew said he preferred to have Harris come off the bench and play behind Teague. With a healthy Williams available, Drew didn't have to worry about playing Teague and Harris at the same time.
The Hawks' backcourt also is limited by injuries to DeShawn Stevenson, who is not cleared to play on back-to-back days due to a sore right knee, and Anthony Morrow, who has missed 12 straight games with a right hip and lower back injury. Drew said Morrow is day to day.
The loss of Williams is the biggest setback. The Atlanta native signed with the Hawks as a free agent after averaging a career-best 14.9 points with Philadelphia last season.
"It's all part of the business," Drew said. "You hate to see it happen.
"You hope for a fast and speedy recovery but you have to move on. I'm expecting the guys to respond to this, I really am. This is just another test for us as a team and me as a coach."
Spurs coach Greg Popovich said Williams is "a hell of a force" and added, "I hate to hear he's out for the whole year."
Hawks center Al Horford, who missed Friday night's game with a sore left calf and hamstring, is starting against the Spurs.