Williams becomes the fifth and final player to accept new terms from the club, along with Joe Lennox, Ollie Chenoweth, Durrell Berry and Warren Feeney.
Argyle boss Carl Fletcher is pleased to get the final piece of last season's back four in place.
"Towards the end of last season, Willo came in and did very well for us," Fletcher told the club's official website.
"He was a good member of the defensive unit and because he's got Onismor Bhasera also in that position, they push one another to perform well and consistently and it's pleasing that we've got him on board.
"He's someone who knows what we're doing and what we're about and he's got great quality and technical ability when he's on the ball.
"It's great that players want to be here and want to do well. It's exactly what we want."