"Decisions like these are difficult to make, and I want to thank Monty for his hard work and dedication," Pistons owner Tom Gores said in a statement.
"Coaching has many dynamic challenges that emerge during a season and Monty always handled those with grace. However, after reviewing our performance carefully and assessing our current position as an organization, we will chart a new course moving forward."
The Pistons' 28-game mid-season skid was the longest single-season losing streak in NBA history.
They finished in last place in the Eastern Conference with a league-worst 14-68 record.
Williams, a former coach of the New Orleans Pelicans and Phoenix Suns, departs a year after inking a six-year contract worth a reported $78.5 million -- the largest coaching deal in NBA history.
ESPN reported the Pistons would "absorb" the $65 million remaining on his contract.
Gores had brought Williams, the 2022 NBA Coach of the Year in Phoenix, to Detroit hoping he could revive a young roster sparked by Croatian forward Bojan Bogdanovic.
But in his first term the Pistons were even worse than their 17-65 record in 2022-23, after which Dwane Casey stepped down as coach.
"We are unwavering in our commitment to bring a championship-caliber team to Detroit," Gores said, promising the team would be "diligent and swift" in their search for a new coach.
The Pistons have the fifth overall pick in next week's NBA draft.
