The school headteacher, played by Sandy Winton, will bow out on screen in 2012 after nearly two years in Ramsay Street.
Michael's daughter Natasha (Valentina Novakovic) will remain in Erinsborough despite her father's exit.
Neighbours' executive producer Susan Bower commented: "The Michael Williams character will be leaving Ramsay Street as part of a significant story coming up in April. Sandy's contribution to the show has been superb, enabling the character to be part of some milestone storylines.
"Tash will remain in Erinsborough so the Williams name will live on."
Michael's latest storyline has seen him panic as Tash delves into the details of her mother's death. Tash's aunt Emilia, played by Freya Stafford, has also recently been introduced to viewers.
The Williams family made their Neighbours debut in May 2010.
> Read our August 2011 interview with Sandy Winton
> Read more Neighbours spoilers and news