The Bulldogs had issued an injunction against Williams playing for any other side while still under contract but a settlement has now been reached and the injunction withdrawn.
"We remain bitterly disappointed at the manner in which Sonny Bill deserted his teammates and his supporters," said Bulldogs chief executive Todd Greenberg.
"We have, however, reached the point where we need to get on with business and we have withdrawn the injunction against him playing for any other club.
"Neither the Bulldogs nor Sonny Bill have anything further to gain by drawing this situation out any further.
"With this matter resolved we now look to finishing off our final few games of the season as strongly as possible."
Williams had been under contract with the Bulldogs for a further four seasons but walked out on the club with seven games still to play in the current NRL campaign.
Although the settlement states that Williams cannot play for any other NRL club until the end of the 2012 season, this is unlikely to affect his career as he has already stated that he is determined to break into the All Blacks set up and has no intention of ever returning to rugby league.