Williams exited the Test arena in December, winning his 87th and final cap against Australia in Cardiff as he brought down the curtain on an international career that saw him score a Wales record 58 tries.
The 34-year-old wing is under contract with the Ospreys until 2013, but BBC Sport Wales claimed Williams intends retiring completely at the end of this season.
Neither Williams nor the Ospreys have so far made any comment.
Wales are currently preparing for their first Six Nations game without Williams, against Ireland in Dublin on Sunday.
"He has been amazing for Wales, Ospreys and the Lions," Wales skills and kicking coach Neil Jenkins said.
"He is a huge player, a Welsh rugby great, and he will be sorely missed.
"It is difficult - and I have done it myself - when you come to the end of your international career.
"That is what you have played for all your life, and Shane is no different to me. He feels the time is right, and only he knows.
"He has had an outstanding career. He helped the youngsters in the squad, taking them to one side and doing different things with them, and he has been a massive help to us on and off the pitch."
Williams was named the International Rugby Board's player of the year in 2008, while he was also a Test Lion, helped Wales win Six Nations Grand Slams in 2005 and 2008 and featured in three World Cup campaigns.
He made his Test debut against France during the 2000 Six Nations tournament, and toured with the Lions to New Zealand in 2005 and South Africa four years later.
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