The All Blacks start the European part of their tour with the Investec International against England at Twickenham on November 6.
Williams switched codes in 2008, joining Toulon on a two-year deal. However, he turned down a lucrative offer to remain with the French club this summer.
Instead the 25-year-old decided to return to New Zealand in the hope of forcing his way into the national team ahead of the 2011 World Cup.
"A special congratulations to Sonny Bill Williams who is named in the All Blacks for the first time," All Blacks coach Graham Henry said. "He has been selected on form. He is playing very well for Canterbury and he has deserved selection."
Henry has also called up Hikawera Elliot and Alby Mathewson, who have appeared for the All Blacks before, but are officially picked for the first time.
Elliot is one of three hookers in the squad, with Andrew Hore also named despite not playing since dislocating his shoulder in May.
Fly-half Stephen Donald has got the nod to back up first-choice number 10 Dan Carter ahead of Aaron Cruden and Colin Slade.
"Stephen Donald was in a very competitive fight for the number 10 position," Henry added during a televised news conference.
"I spoke to the other two guys today and I say they couldn't have done any more. They had all played superbly well and Stephen has won through by outstanding performances."
Scrum-half Piri Weepu and full-back Israel Dagg, who failed to recover from a persistent thigh problem, are both ruled out through injury.
New Zealand squad
Forwards: John Afoa, Anthony Boric, Daniel Braid, Tom Donnelly, Hikawera Elliot, Ben Franks, Owen Franks, Andrew Hore, Jerome Kaino, Richie McCaw (capt), Keven Mealamu, Liam Messam, Kieran Read, Brad Thorn, Samuel Whitelock, Tony Woodcock.
Backs: Andy Ellis, Daniel Carter, Jimmy Cowan, Stephen Donald, Hosea Gear, Cory Jane, Alby Mathewson, Mils Muliaina, Ma'a Nonu, Josevata Rokocoko, Sitiveni Sivivatu, Conrad Smith, Isaia Toeava, Sonny Bill Williams.
All Blacks Tour
Saturday 30 October, v Australia, Hong Kong Stadium, Hong Kong
Saturday 6 November, v England, Twickenham, London
Saturday 13 November, v Scotland, Murrayfield, Edinburgh
Saturday 20 November, v Ireland, AVIVA Stadium, Dublin
Saturday 27 November, v Wales, Millennium Stadium, Cardiff