The two clubs had been locked in a tug-of-war to recruit the Perth Glory stopper.
But it's understood, the off-contract Williams has chosen to join Victory next season on a two-year deal, which is set to be announced this week.
Williams is said to feel the Navy Blues' free-flowing style may be better suited to bringing out the best in him.
Speaking to The World Game last month the defender said he was flattered to have both the Sky Blues and Victory after his services, but reiterated ultimately the decision would come down to what move would suit him best.
"It's always nice when the top two teams in the country are showing interest," he said last month.
"There are bits and pieces from around and it's now a question of sitting down with my agent and my family and friends and working out the best move going forward."
The 28-year-old made 16 appearances in his first season for Glory, where despite being frozen out of the match-day squad for seven games mid-season, he was able resurrect his career after a succession of injuries cut short his tenure with English club Middlesbrough.
While admitting last month he is still not yet back to peak fitness, the cultured utility will now have the benefit of a full pre-season to put the final pieces of the jigsaw back together.
His recall to the Socceroos squad for the recent World Cup qualifiers against Iraq and UAE showed the esteem in which he is held by coach Ange Postecoglou.
And Williams is expected to again be in the mix for June's crucial qualifier against Saudi Arabia, the friendly against Brazil and the FIFA Confederations Cup after that.
His capture is proof positive that Muscat is deadly serious about closing the gap on the Sky Blues, by far the dominant team of the 2016-2017 campaign, who inflicted the heartbreaking grand final defeat on his men on Sunday.