Williamson and pace bowler Lockie Ferguson have turned down New Zealand Cricket central contracts, to further concentrate on overseas T20 franchise leagues.
Williamson will relinquish the captaincy of the Black Caps' white-ball sides.
Players offered NZC central contracts must commit to being available for both the Black Caps and the domestic Super Smash competition.
Williamson said his decision should not be interpreted as a sign he was losing interest in international cricket and said he remained open to potentially accepting a central contract offer in the future.
"Helping push the team forward across the formats is something I'm very passionate about and something I want to keep contributing towards," he said
"However, pursuing an overseas opportunity during the New Zealand summer means I'm unable to accept a central contract offer.
"Playing for New Zealand is something I treasure, and my desire to give back to the team remains undiminished.
"My life outside cricket has changed however - spending more time with my family and enjoying experiences with them at home or abroad is something that's even more important to me."
NZ Cricket chief executive, Scott Weenink, said Williamson was a great New Zealand player who had earned the right to take some time off to pursue other goals, including family-oriented priorities.
"This is a good way to help keep Kane in the international game so that he continues to play a major role for the Black Caps - both now and in the years to come," Weenink said.
"We have very little international cricket in New Zealand through January and outside that period he's still available for the Black Caps.
"NZC has a strong preference to select centrally contracted players for the Black Caps, however we're happy to make an exception for our greatest ever batter - especially as he remains so committed to the team.
"I know it sounds a bit counterintuitive, but I'm very encouraged by this development."
Pace bowler Ferguson has also indicated he won't accept a central contract offer when the contracting process opens.
An announcement covering the final list of contract offers is likely next month.
Williamson, 33, captained New Zealand in all three formats of the game until he gave up the test captaincy to Tim Southee in late 2022.
Pace bowler Trent Boult announced at the T20 World Cup in the Caribbean and the USA that it would be his last.
Williamson was coy about his future in the shortest version of the game when he was asked following New Zealand's early exit from the tournament.
"I don't know," Williamson said when asked if he would be seen in action in the 2026 World Cup in India and Sri Lanka.
After making his debut for New Zealand Williamson has played 100 tests, 165 ODI's and 93 T20 internationals.
He has played in most leagues around the world but only had limited playing time with the Gujurat Titans in the recent Indian Premier League.
