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Williams, 25, leaves after 2 and a half years at the club, in which he played 91 matches for the Foxes, scoring 6 goals.
His last goal for City was in the 2-1 victory at Hull City on Boxing Day. He also scored a memorable goal in a League Cup defeat at Bolton Wanderers.
Williams was signed by former manager Micky Adams from local rivals Nottingham Forest in a tribunal fee set at £500,000, in July 2004.