Williams has spent the past 11 seasons at the Arms Park, having progressed through the club’s age-grade and academy system.
He has been in fine form this season, bagging three tries in eight games since the World Cup, and pulling the strings in a young back-line.
The club had hoped to retain the services of the 29-year-old but were unable to compete with the offer from Gloucester, within the current salary cap.
Cardiff head coach Matt Sherratt said: “Naturally we are very disappointed to be losing a player of Tomos’ quality.
“As I mentioned a couple of weeks ago, he has been absolutely brilliant since I’ve returned here, both in terms of his performance and leadership on the pitch to the way he conducts himself and drives standards throughout the environment.
“We made our best possible offer but given the current financial landscape and salary cap in Wales, he has unfortunately decided to move on.
“While disappointing, it is understandable that Tomos wants to experience something else in his career, and given he has been here for more than a decade, he certainly deserves that.
“He was the guy that got us back into the European Challenge Cup final against Gloucester, he has contributed a huge amount to the club since making his debut and will leave with our very best wishes.
“I know Tomos is now hugely motivated to give his all to the club in the remaining months of his contract and to finish the season as positively as possible.”
Williams made his senior debut as a replacement against Munster in 2013, and quickly became a key member of the squad.
He was called up to the Wales squad for their 2017 Summer tour and made his debut a year later. With two Guinness Six Nations titles under his belt, Williams has now amassed 53 caps.
The Treorchy product added: “I’m really grateful to Cardiff for everything they have given me in my career.
“This club is all I have known and after 11 years with the first team squad, I feel the time is right to make a change.
“I have made a huge amount of friends, have great memories and will always love running out at the Arms Park.
“I will hopefully do that a few more times and will give my all to the team for the rest of the season.
“I am excited for a new chapter with Gloucester but remain 100 per cent committed to Cardiff and will always look back on my time here with great fondness.”
