Williams rushed for 517 yards and seven touchdowns last season. He was expected to be a major part of Buffalo's running game as LeSean McCoy's primary backup.
"As an organization, we are disappointed that Karlos has put himself in this situation," the Bills said in a team statement Friday. "Poor decisions such as this affect not only the individual, but the entire Bills organization. We will continue to work with Karlos through the various player programs we provide to assist him in making better decisions moving forward."
It has been a rough offseason for Williams, who also showed up to spring practices overweight.
The Bills led the NFL in rushing last year but are dealing with plenty of issues at running back. Rookie Jonathan Williams was arrested and charged earlier this week on suspicion of driving under the influence, and his status remains unclear. McCoy was involved in a nightclub brawl this offseason but was recently cleared and will not face a suspension by the league.