Williams will undergo surgery on Monday after rupturing the achilles tendon which required an operation last July and saw him miss the entire 2009 All Blacks campaign.
"This rupture occurred just below the area that was previously operated on," Blues team doctor Stephen Kara said.
"Ali will undergo surgery early next week. He will not play for the Blues again this season and will be unable to play rugby for at least six months."
A distraught Williams, 28, said it was not a contact injury but instead occurred while changing direction when running.
"I knew what it was as soon as it happened. As you'd expect I'm absolutely gutted," he said.
Williams was escorted from North Harbour Stadium by two Blues medical staff while struggling to put weight on his lower right leg.
The game was less than four minutes old and will be an enormous wrench for Williams, who had trained well with the Blues for the past six weeks, had undergone a careful recovery from the injury, as well as a shoulder operation. He recently spent time in California as part of his recuperation.
If Williams is ruled out of international rugby, it will be a blow to the All Blacks and their coach Graham Henry, who struggled to replace the athletic Aucklander last year. Isaac Ross was employed with mixed success through the June tests and Tri-Nations while provincial journeyman Tom Donnelly was an effective performer on the season-ending tour.
Williams' last test was in 2008, a season when he started all 15 tests.
Blues coach Pat Lam said losing his vice captain was a massive loss both on and off the field.
"He was really excited about playing and has been working tremendously hard. His leadership cannot be overestimated and he'll be very hard to replace. It's a real tragedy."
The Blues head to Nelson for a pre-season camp before playing the Crusaders in Motueka on Thursday. A replacement for Williams is likely to be named next week.
Williams' injury follows news that long-time locking partner Chris Jack will be sidelined for a month with a wrist injury. Jack rejoined the Crusaders this year after two years overseas.
Meanwhile, the Blues recovered from the jolt of losing Williams tonight to beat the Chiefs 31-21, scoring five tries to three.
Two of them went to fullback Paul Williams while outside backs Rudi Wulf and George Pisi and prop Charlie Faumuina were the others to cross.
The Chiefs, who trailed 10-7 at halftime in scorching conditions, crossed through fullback Tim Nanai-Williams, flanker Jack Lam and hooker Aled de Malmanche.
Result:
Blues 31 (Paul Williams 2, Charlie Faumuina, George Pisi, Rudi Wulf tries; Stephen Brett 2 con, Mike Harris con) Chiefs 21 (Tim Nanai-Williams, Aled de Malmanche, Jack Lam tries; Callum Bruce con, Mike Delaney con, Stephen Donald con). Halftime: 10-7.
