Just after 7 p.m. ET Tuesday, the All-Star point guard tweeted, "Made a very difficult decision today ..." along with a link to a photo of the Nets' logo.
Williams' decision to stay was confirmed by ESPN.com. His contract will be worth $98 million over five years, according to sources.
Williams chose the Nets over his hometown Dallas Mavericks, who could only offer four years, $75 million based on the rules outlined in the collective bargaining agreement.
Williams had said he was willing to re-sign with the Nets, assuming they put the right pieces around him.
The Nets, under the direction of GM Billy King and assistant GM Bobby Marks, have been aggressive in doing just that this offseason. They've already re-signed forward Gerald Wallace, traded for shooting guard Joe Johnson, reached a verbal agreement with Bosnian stretch forward Mirza Teletovic and executed a sign-and-trade for rugged rebounder Reggie Evans. All deals at this point are verbal agreements as no moves can be made official until July 11.
Re-signing restricted free agent center Brook Lopez would likely be Brooklyn's next priority, if it doesn't move him in a blockbuster trade for Orlando Magic center Dwight Howard, who wants to be traded to the Nets.
The Nets tried to sell Williams on the idea that he'd be the face of the franchise as it moves into the $1 billion Barclays Center next season.
Williams has said he's enjoyed living in Manhattan with his family and has also enjoyed all the marketing opportunities he's been afforded. Williams has also forged great relationships with King and coach Avery Johnson.
Sources told ESPN.com's Marc Stein that the Mavericks were notified of Williams' decision by agent Jeff Schwartz on Tuesday night. Club officials declined comment.
Williams was traded from the Utah Jazz to the Nets on Feb. 23, 2011.
Williams, 28, averaged 21 points and 8.7 assists in 55 games for the Nets last season.
While the Nets have made a flurry of moves to revamp the franchise, ex-Net Jason Kidd does not seem likely to make his return.
A source told ESPN The Magazine's Ric Bucher that the veteran guard's decision is down to the New York Knicks and Mavericks.
The Mavs had planned all along to make a run at bringing back Nowitzki's close friend Steve Nash in the event that they failed in their pursuit of Williams. Yet it remains to be seen what sort of bid Dallas will lodge to compete with Toronto and New York, who have emerged as the two leading suitors for Nash.
Mike Mazzeo is a regular contributor to ESPNNewYork.com. ESPN.com's Marc Stein and ESPN The Magazine's Chris Broussard and Ric Bucher contributed to this report.