Pasecniks, 24, has averaged 8.2 points and 22.1 minutes across 13 games for the Wizards this season.
"AP has worked tremendously hard with our coaching staff during his time in summer league, with the (Capital City) Go-Go and with the Wizards and his development has shown progress," general manager Tommy Sheppard said in the press release. "He is following the path set by Jordan McRae last season and provides another example of our vision for developing players within our system and benefit of sharing our facility with the Go-Go."
The 7-foot-1 center was originally signed to a two-way contract in mid-December after the Wizards released Chris Chiozza. Pasecniks was a first-round pick of the Orlando Magic in 2017 and spent time with the Wizards' G League affiliate to open the 2019-20 campaign.
Miles, meanwhile, averaged just over 16 minutes over 10 games, shooting 32-31-75 in his first season with Washington. The 32-year-old was slated for free agency this summer.
Williams will now occupy the two-way spot made vacant by Pasecnik's conversion to a standard NBA deal. The Wizards waived the 24-year-old on Jan. 4 after he reached the maximum amount of time as an injury hardship exception. Williams averaged 5.5 points and 6.3 rebounds in six games.