Williams, 27, initially joined in July as coach James Lowes’s first signing since taking over from the departed Francis Cummins at Bradford.
The ex-Leeds Rhinos wideman, who has also played rugby union for Newcastle Falcons, has impressed enough, though, to earn a contract for 2015 and 2016.
Yesterday at Castleford Tigers marked his sixth game for Bradford, he has scored two tries so far and is seen as someone who can greatly aid their battle to get out of the Championship next season.
Lowes said: “Danny is a very experienced player, who has age on his side.
“I’m really pleased that the deal has gone through, as I feel he provides good competition out wide.
“I’m looking forward to working with him during pre-season training and going into next year, where he could prove fairly key for us.
“Wherever he has gone in the past, he has always worked extremely hard and that is what I like about him.
“His attitude is first class,” added Lowes.
Williams, who has earlier spells with Hull FC and Castleford, added: “I was really excited about coming to Bradford to begin with, so am obviously delighted to be extending my stay.
“This is a club with big ambitions for the future and I want to be a part of what is eventually achieved here,” he said.
“I love working with James Lowes and am excited about what the next couple of years could bring.
“With the way the squad is shaping up for next year, I think our supporters can be confident of us making an immediate return to Super League.
“I fully intend to keep fit and find my very best form in order to help ensure that happens,” he added.
Meanwhile, Bradford have confirmed ex-St Helens winger Jamie Foster will be leaving the West Yorkshire club at the end of the season.