The Welsh Rugby Union confirmed in a statement on Wednesday morning that the Scarlets full-back/wing will remain with the training squad.
But they gave very few details on the extent of the injury or rehabilitation process.
The 24-year-old, who has been named in the Guinness PRO12 Dream Team two seasons in a row, enjoyed a stellar RBS 6 Nations campaign earlier this year after forcing his way into the starting XV.
One of Wales’ most exciting backs, Williams was expected to again push for a starting berth when the Rugby World Cup kicks off in September.
While the player prefers to line up at full-back, it is on the wing where head coach Gatland deployed during the Six Nations in place of injured George North and then out of form Alex Cuthbert.
Should he fail to recover in time for the tournament, Williams’ elusive running, dominance in the air, work rate, as well as his versatility, will be a huge loss to Gatland.
Cuthbert would be in pole position to start on the wing with North should Williams fail to make it while Newport Gwent Dragons winger Hallam Amos and the Ospreys’ Eli Walker can provide cover, but Williams’ absence will pose a debate of who will cover the recently injury-prone Halfpenny at full-back.
Experienced versatile back James Hook would be a popular choice with fans, but the Gloucester man, who helped his club win the European Challenge Cup, has been on the fringes in recent years, while Cardiff Blues outside-halves/full-backs Gareth Anscombe and Rhys Patchell have limited experience on the big stage.
Matthew Morgan, another versatile back who impressed on his debut off the bench in South Africa last autumn, could be a wildcard choice despite playing his rugby outside of Wales.
The Bristol youngster helped is club to the Greene King IPA Championship final, was the league’s player of the year, and is an exciting prospect with a reputation for devastating running given half a metre of space.
Wales have already lost influential Clermont Auvergne centre Jonathan Davies for the entire campaign after knee ligament damage, while Scarlets prop Samson Lee is rehabilitating an Achilles problem.
While the Wales coaching staff will give Williams as much time as possible to make a swift recovery as the players negotiate intensive training camps in Switzerland, Qatar and Poland in the coming weeks, a decision will have to be made before the deadline for the final 31-man Rugby World Cup squad on 31 August.
Before that date, Wales will have faced Ireland home and away in warm-up matches with a final match against Italy at the Millennium Stadium on 5 September, 15 days before their opening Pool A match against Uruguay.
MORE: The latest football news
MORE: The latest tennis news
BIOGRAPHY: Ethan Hazard
BIOGRAPHY: Daniel Sturridge