The Roosters said in a statement on Friday that Williams had pledged his commitment to the club for 2014 and it expected him to sign a new deal in mid-February on the same terms and conditions as his 2013 contract.
Williams had been weighing up a return to the world champion All Blacks and Super Rugby champions the Chiefs since spearheading the Roosters to their NRL grand final triumph over Manly on Sunday in his first season at the club.
The New Zealand Rugby Union (NZRU) broke the news first that Williams had rejected their offer on the official All Blacks Twitter account.
"@SonnyBWilliams NOT coming back to play rugby for @ChiefsRugby and #AllBlacks in 2014. It is likely he will be playing for the Roosters," it wrote.
"Disappointing but we put our best foot forward, & in the end @SonnyBWilliams made his decision, NZ Rugby's Neil Sorensen said."
Sorenson, the NZRU general manager of professional rugby, indicated they would leave the door open for Williams to return in 2015 ahead of that year's Rugby World Cup.
"We obviously worked pretty hard to bring Sonny home, and we have had some really good conversations with him," he said.
"As we do with many players who leave New Zealand, we will continue to keep the lines of communication open with him about his playing career."
Chiefs coach Dave Rennie took a similar line after failing to get Williams back to the Hamilton-based Super Rugby franchise where he won a title in 2012.
"While we are disappointed that Sonny won't be with us in 2014 now, well be keen to keep talking to him about future options," said Rennie.
Williams and his agent Khoder Nasser were on Thursday filmed having lunch with Sorenson, Rennie and his assistant coach Wayne Smith in Sydney, fuelling speculation he was returning to rugby.
The 28-year-old looked set to walk away from the NRL when he made himself unavailable for the Rugby League World Cup on Monday.
However, later that day he contacted Kiwis coach Stephen Kearney to say he had changed his mind and wanted to help New Zealand defend their crown in the UK later this month.
Williams was subsequently added to the squad at the expense of young Melbourne back-rower Tohu Harris.