He is expected to be confirmed as the squad's second driver when the new Williams-BMW FW22 is launched.
The Italian had been discussing a contract severance after a difficult 1999 season in which he scored no points.
Williams were disappointed by Zanardi's inability to run closer to the pace of his team-mate Ralf Schumacher, while the former CART champion had grown disenchanted with the team and was considering retirement.
The contract severance would have given Zanardi more than enough money, and rumours suggested that he would abandon racing and concentrate on his family, despite efforts to bring him back to the Fedex Championship Series.
However, Williams have struggled to find a replacement. Favoured choice Juan Montoya is tied to a Ganassi CART contract and none of the other drivers considered had the Formula One experience or the pace to be serious contenders.
Formula Three star Darren Manning, test drivers Bruno Junqueira, Tom Kristensen and Jorg Muller and F1 refugees Jos Verstappen and Olivier Panis were all mentioned in connection with the vacant seat.
Ralf Schumacher recently suggested that none of the potential replacements would do any better than Zanardi, and that Williams ought to keep the Italian for a second season, despite the apparent unwillingness of both parties.
Zanardi was off the pace at the start of the season but seemed to have adapted to the nervous narrow-track F1 design by the Hungarian Grand Prix. He all but matched Schumacher in Hungary, Belgium and Italy then appeared to lose his way again in the final three races.
His car suffered appalling reliability all season but the main problem seemed to be in qualifying, where Schumacher would regularly be 1-1.5s quicker.
Ironically, while Schumacher has been logging plenty of test miles with the new BMW engine, Zanardi has been sat at home while the team tested potential replacements, a move which is unlikely to help the Italian's pre-season preparations.
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