The 35-year-old, who left Molineux in 2017 after an injury-hit spell, has taken a player-manager role with the National League North side, who were demoted down from the National League last month owing to breaking financial rules.
Williamson played just 10 times for Wolves before joining Oxford United and then became a player-coach with Gateshead last season.
He said: "I’m very excited to be the new manager of Gateshead,” said the former Newcastle United defender.
“I still feel that I’ve got a lot to give as a player and feel as fit as ever. I found that I could have a really good influence on the team coaching from within as well as on the sidelines. I’m just going to keep pushing and giving everything that I’ve got as I have done throughout my career.
“I aim to be a manager that improves people and creates a highly competitive environment but I want the players who come here to know that I will do everything I can to improve them and people and players."