"His level of testing knowledge, and ability to analyse data, will significantly help to drive forward development of the FW38 throughout the season," deputy principal Claire Williams said in a statement.
Paffett, 34, is a veteran of the test circuit after taking part in 72 official test days between 2001 and 2013 and clocking up 22,745 km.
The Briton, who has never raced in Formula One, won the German Touring Car (DTM) championship with Mercedes in 2005.
Mercedes-powered Williams, who last took a title in 1997 and have not won a race since 2012, are the third most successful Formula One team in terms of race wins with 114. They have finished third overall for the past two years.
(Reporting by Alan Baldwin; Editing by John O'Brien)
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