The team announced the move in a statement on Wednesday. Williams didn't make the trip for the Magic's road game against Indiana Wednesday night.
Magic president of basketball operations Otis Smith told reporters after the morning shoot around that he didn't think Williams, who had slipped to the fourth point guard spot, was upset with playing time.
He played in all 82 games last season, but appeared in just 16 games this season and averaged 2.1 points and 1.5 assists.
Williams missed four games in late December with a sore foot and five more games earlier this month for what was characterized by the team as "personal reasons." He most recently dressed in the team's 103-96 loss to Detroit on Monday.