Trailing 3-0, Cleveland tied it in the eighth on a double and back-to-back homers off Williams, who held the Indians hitless until Travis Fryman singled with two outs in the seventh.
Cleveland went on to win 6-3 in 13 innings Wednesday night on Fryman's three-run homer off Carlos Almanzar (1-2), ending the Blue Jays' 11-game winning streak.
Toronto remained 4 1/2 games behind the Red Sox in the AL wild-card race. Boston lost to the New York Yankees 7-5. Texas tied the Blue Jays with an 8-0 shutout of Kansas City.
"When you look at the standings, you know we can't afford to lose," Williams said. "I feel I let the whole team down, from the coaches to the players. The hitters gave me three runs and a chance to win. I made two bad pitches, and they scored three runs."
After Richie Sexson led off the eighth with a double, Einar Diaz hit his first major league homer. Omar Vizquel followed with his second homer of the season to tie the game and chase Williams.
"We haven't hit Williams well this year, but typically he's strong in the first two-thirds of a game, and in the last third, he tires a little bit," said Fryman, who hit his 25th homer.
Doug Jones (1-2) pitched two scoreless innings, and Mike Jackson got three outs for his 37th save.
Toronto shortstop Alex Gonzalez struck out six times in as many at-bats, tying the major league record for strikeouts in an extra-inning game. It's the seventh time that's happened, and the first since Baltimore's Sam Horn in 1991.
"I'd like to put it behind me," Gonzalez said.
Williams, a 32 year-old right-hander, gave up three runs and four hits, struck out six and walked two.
"You hate to loss a game like this one," Williams said.
Toronto scored a run in the second when Cleveland starter Dwight Gooden threw a wild pitch with the bases loaded.
The Blue Jays made it 2-0 in the third on Shannon Stewart's eighth homer of the season and 3-0 in the sixth on Carlos Delgado's 30th homer.
Gooden gave up three runs and six hits in seven innings. He struck out a season-high seven and walked three.
"They've been playing well, and Woody was pitching great, but we got some big hits off them," Cleveland's Brian Giles said. "New York won, so they didn't lose any ground. But with only a couple weeks to go they're going to have to win as many ballgames as they can, and they'll have to get some help from other teams."
Notes: Just before Fryman singled to break up the no-hit bid, right fielder Shawn Green made an over-the-shoulder catch to rob Manny Ramirez of a hit. ... Cleveland's Jim Thome planned to take batting practice today for the first time since being placed on the disabled list Aug. 7 with a broken right hand. Manager Mike Hargrove expects Thome to begin a rehab assignment this weekend. ... Gooden has not lost since July 26, a span of eight starts. ... Toronto's 11 consecutive victories matched a franchise record set in 1987. ... The Blue Jays' Jose Canseco hit a ball into the fifth deck during batting practice. ... Gonzalez's six strikeouts set a club record.