Terms of the deal were not disclosed.
Williams was originally selected by the Jazz 47th overall in 2003 and has bounced around despite having a lot of success over his career. The 6-foot-1 combo guard has made two stops in Utah, along with stints in Milwaukee, Cleveland, Los Angeles and Portland.
Williams, 31, has averaged 13.3 points and 4.9 assists per game over his career. His best season came in 2008-09, when he earned an All-Star appearance playing next to LeBron James in Cleveland.
"We are excited to bring Mo into the fold this season," said Timberwolves head coach Flip Saunders. "His veteran leadership and excellend three-point shooting ability will be a valuable addition to our team.
Williams has hit 3-pointers at a 38.5 percent clip over his 11-year career.