New Zealander Williams is rated as one of the most explosive ball carriers in European rugby.
The 32-year-old had a successful career in his homeland, making 37 appearances for Auckland Blues in Super Rugby and also representing North Harbour.
Williams joined Munster in 2008 and helped them secure the PRO12 title in his debut season.
He later moved to Italian outfit Aironi, where he scored 10 tries in 31 league games, before linking up with Ulster where he has become a huge fan's favourite.
Williams, who has represented New Zealand at Under-21 level and the Junior All Blacks, was named the PRO12 Player of the Season after the 2012/13 campaign.
Head Coach Danny Wilson said: "Nick has been one of the standout performers in the Guinness PRO12 for the last few seasons so we are thrilled that he will join us from next season.
"He is an extremely physical and uncompromising forward who will give us real edge and bring a real winning mentality with him. Nick is undoubtedly a strong ball carrier who is involved in big collisions in both attack and defence.
"We are pleased to bring a player not only of his quality but also with vast experience to the region as we look to enhance our back row options and firepower for the coming seasons."
Williams - the older brother of Chiefs wing Tim Nanai-Williams and cousin of All Black Sonny Bill Williams - has made 67 appearances at Ulster Rugby, scoring 13 tries during a four-year spell.
He said: "It is a new challenge for me and I'm excited about what I've heard about what Cardiff Blues are looking to achieve, both on and off the field, in the coming years.
"I feel both physically and mentally as strong as ever and I'm ready to make an impact. Ulster have looked after me so I feel I can really contribute in Wales and in a new environment.
"I spoke to Danny at length about the region and his plans. I'm now looking forward to using my experience to help the team and getting stuck in.
"I've enjoyed my time in Belfast and it's been a successful time at Ulster," he added.
"The Ulster people are special and the supporters have always been so good to me. My daughter was born in Ireland so it will always be a special place and I'll be giving everything until the end of this season for the team."
Factfile:
Full name: Nicholas Uek Nanai Williams
Born: December 2, 1983, Auckland, New Zealand
Major teams: Aironi, Blues, Junior All Blacks, Munster, Ulster
Position: Back Row
Height 6ft 3in
Weight 264lb
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