Williams, 40, was using a stint with Carolina of the Puerto Rican league to get in shape and had hoped to play for Puerto Rico in the upcoming World Baseball Classic, as previously reported on this site.
The injury makes the possibility of his playing in the WBC a dubious one.
After hitting a single in his first at-bat for Carolina, Williams had gone hitless over three games worth of at-bats.
Williams, who patrolled center for the Yankees for 16 years, never officially retired, but hasn't played in the majors since the 2006 season.
For his career, Williams hit .297 with 287 home runs in 2,076 games.
His life in baseball may finally be done forever, but his second jazz album comes out in April.