Elwood Williams III, 68, a retired official of the State Department, where he was widely recognized as an expert on U.S.-German relations, died of multiple sclerosis June 30 at Georgetown University Hospital.

Mr. Williams was born in New York City and received part of his education in Germany. He joined the Foreign Service in 1940 and was assigned to Winnipeg, Canada. During World War II, he was a Navy officer and served in the Atlantic and the Pacific.

He moved to Washington after the war as a student at the Georgetown University School of Foreign Service, where he graduated in 1948. He then returned to State and was assigned to the Bureau of German Affairs. Because of an illness, he spent the rest of his career there. He retired in 1974 and became a consultant to State.

Mr. Williams was decorated by the State Department and the West German government for his contibutions to German-American relations.

Survivors include his wife, Frances McLean Williams of Washington; three children, James, of Plainsboro, N.J., Anne, of Lewiston, Maine, and Elizabeth Barton of Bethesda; a sister, Emily Evans of East Falmouth, Mass., and a brother, Palmer, of New York City.