Williams took the managerial reins on a short-term basis until the end of the season in February, following the decision to part company with Martin Ling and managed to guide the O's to League One safety.
Williams and assistant Kevin Nugent have both put pen to paper on contracts which run until the end of next season.
"I have been thoroughly impressed with what I've seen at Leyton Orient and I'm delighted to renew my contract," he told the club's official website.
"We achieved the aim of staying in this division for next season and we'll be working hard to build on that.
"We'll lay down our plans for pre-season and hit the ground running for 2009-10."
O's chairman Barry Hearn added: "We're delighted George and Kevin have agreed to stay with us and continue the good work that they've started over recent months.
"They've impressed us with their professionalism and dedication and the results have been excellent at a difficult time.
"The first aim was always to maintain League One status and that's been done with some breathing space so now our focus turns to next season and improving the squad.
"We look forward to them leading the team for at least next season and would urge all our supporters to show their appreciation and backing for them at Saturday's final match of the season."