The former booking agent and talent manger was credited with discovering John Lennon, Paul McCartney, George Harrison, Pete Best and Stuart Sutcliffe in Liverpool in the early 60s.
Mr Williams, from Liverpool, worked with The Beatles from 1960 to 1961, taking them to their first band gigs across Britain and later in Hamburg, Germany where their international fame grew.
The band – John Lennon, Paul McCartney, George Harrison, Pete Best and Stuart Sutcliffe – then signed a five-year contract with Brian Epstein.
“No Allan Williams, no Hamburg. No Hamburg, no Beatles”
Beatles historian Mark Lewisohn
Allan also founded the famous Jacaranda Club on Slater Street, Liverpool.
Sharing the sad news on Facebook, the club wrote: “Today [Friday] is one of the saddest days in our history.
“The Jacaranda’s original owner and the man who discovered The Beatles, Allan Williams, has sadly passed away at the age of 86.
“All of our thoughts and wishes go to his family and his wife Beryl.
The Beatles on stage at the London Palladium during a performance in front of 2, 000 screaming fans, 1963
“His legacy has allowed us to remain at the heart of the Liverpool music scene for almost 60 years and his memory will live on through every band that plays our famous stage.
“Allan, you will be missed.”
His cause of death has not been reported.
Mr William previously spoken of his “pride” at being a “small cog” in creating the Fab Four.
He later co-wrote a memoir called Allan Williams: The Man Who Gave The Beatles Away.
Beatles historian Mark Lewisohn tweeted: “No Allan Williams, no Hamburg. No Hamburg, no Beatles.”