Gatland will this weekend name a 26-man squad for the fixture against the Wallabies, but he has already confirmed that Williams, Wales' record try-scorer with 57, will be in the party.
Gatland also revealed that the Ospreys three-quarter will start against Robbie Deans' side, fitness permitting.
"Shane is playing well at the moment, we will be selecting him on Sunday and we want him to start against the Wallabies," said Gatland.
"He has been a magnificent servant, not just to Welsh rugby, but to the world game and fans who believe he deserves a magnificent send-off will not be disappointed.
"This game is important to us, it will help us put the disappointment of those final two matches in the World Cup behind us and can be a springboard to our 2012 Six Nations campaign.
"We will name a 26-man squad this weekend which will largely contain everyone in that World Cup squad who is available to us."
Williams, 34, had initially planned to end his Test career following Wales' World Cup campaign in New Zealand but elected to make himself available for one final contest on home soil in front of a partisan Millennium Stadium crowd.
But Gatland says he will resist any temptation to try to persuade Williams to return in the future, as he looks to build his side towards the 2015 World Cup in England.
"Shane is still playing very well and you never say never as a coach, but if this was the first game of the Six Nations we would be selecting players who we know will be around for the next RWC and he would not be in that category," said Gatland.
"In the new year the philosophy will very much be to start planning for 2015, so if fans want to see the top try-scorer Welsh rugby has ever seen in international action for one last time at the Millennium Stadium, then this game with the Wallabies should be their final opportunity."
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