The British and Commonwealth champion was withdrawn from the contest against reigning champion Sinan Samil Sam after two minutes and 46 seconds of the sixth round.
Williams was staggered on the ropes and on the receiving end of a series of heavy punches when the referee called a halt to the bout.
Things had started to go wrong for Williams in the fourth round when he was knocked down twice, first with a right and then with a left from the Turk, a former world amateur champion.
"
I really should have beaten him - but I'm just going to regroup and come back
"
Danny Williams
He was forced to take a count in the fifth round after taking a hard right hand and never seemed able to deal with the pressure that Sam put him under.
"I just couldn't get my shots off," said Williams after the fight.
"I really should have beaten him - but I'm just going to regroup and come back.
"He seemed to raise his game fighting me - he fought very well.
"I wasn't overconfident - I thought I'd do the business, even after the first knockdown - but it was just a bad day in the office."
"
Danny is a soldier and he's taken it badly - he's absolutely gutted
"
Jim McDonnell
Williams' trainer
Williams' trainer Jim McDonnell told BBC Sport Online that his fighter had suffered from long absences from the ring
"Danny is a soldier and he's taken it badly - he's absolutely gutted.
"He'll bounce back from this - but he knows that he has suffered from too much inactivity and that he's got to box more regularly.
"He was fighting a guy who was competitive and who got himself up for it.
"Danny hit him with a few good shots and jabs but it wasn't to be on the night.
"But he'll take the positives out of the negatives."
Sam improves his record to 17 wins and no defeats with 10 KOs, while Williams drops to 27 wins, two defeats with 22 KOs.
Earlier on Saturday in Liverpool, Birkenhead's Jamie McKeever became British featherweight champion after beating local rival Tony Mulholland.
McKeever scraped a highly-controversial 10-round points win when the pair last met in September of last year.
This time, McKeever left no doubts as a crunching body shot to floor his opponent in the sixth round.
Although Mulholland got up, he was pursued relentlessly around the ring before the referee stopped the contest.