Williams, who memorably played shotgun-wielding stick-up man Omar Little on HBO's acclaimed crime drama, was found dead at his home in Brooklyn on Monday, police in New York said.
No cause of death was given.
A representative confirmed the news, describing the death of Williams as an "insurmountable loss".
Tributes have flooded in for Williams, who as well as his role on The Wire earned fame and plaudits for playing Albert "Chalky" White on the HBO series Boardwalk Empire.
Oscar-winning filmmaker Lee, 64, who like Williams grew up in Brooklyn, shared a picture of himself and "my brother" together.
He wrote on Instagram: "Our Brother Passed Away Today In His Home, Da People's Republic Of Brooklyn. I'm Shook. Drinking A Bottle Of Italian Red Wine-Brunello Di Montalcino By Myself. Our Greats Are Leaving Us Left And Right. GOD BLESS."
David Simon, creator of The Wire, also paid tribute to Williams.
He posted a picture of the actor to Twitter and wrote: "Too gutted right now to say all that ought to be said. Michael was a fine man and a rare talent and on our journey together he always deserved the best words. And today those words won't come."
Isiah Whitlock Jr also starred alongside Williams in The Wire and paid tribute on Twitter.
He said: "Shocked and saddened by the death of Michael K Williams. One of the nicest brothers on the planet with the biggest heart. An amazing actor and soul. May you RIP. God bless."
One Night In Miami star Hodge, 34, said he was stunned by the news.
He wrote on Instagram: "I can't even believe this.
"Rest in power, Mike. You were always a good brother. A fantastic artist and an even better human being. We'll miss you."
Award-winning actress Kerry Washington said: "So heartbroken. @bkbmg thank you for the beauty and joy you brought to the world. Sending love and prayers to your friends, family and everyone who adored you me included We adore you Sir."
Oscar-winner Viola Davis said: "No! So sad. Man do I wish this were a different ending. Rest well."
Giancarlo Esposito, perhaps best known for playing drugs kingpin Gus Fring in crime drama series Breaking Bad, also paid tribute to Williams.
He said: "I have never met a more loving, caring, beautiful human being. A true friend and thespian. I will forever miss you my dear brother. Godspeed."
Horror writer Stephen King said: "Horrible, sad, and unbelievable to think we've lost the fantastically talented Michael K. Williams at the age of 54."
In its statement, HBO, the network where Williams became a star, described his death as an "immeasurable loss".
It said: "We are devastated to learn of the passing of Michael Kenneth Williams, a member of the HBO family for more than 20 years.
"While the world is aware of his immense talents as an artist, we knew Michael as a dear friend who was beloved by all who had the privilege to work with him.
"We send our deepest condolences to his family for this immeasurable loss."