Sheppard was born in Banks, Alabama, the daughter of Artie Mae (née Harden; 1903–1976) and Charles "Shelton" Sheppard. She grew up on a farm owned and worked by her parents. Sheppard's first husband was James Guy, whom she married when she was a high school senior. Together, they had a daughter, Lycretia, born in 1941. Soon after their daughter's birth, the couple separated.
Sheppard met Hank Williams in 1943. Despite the objections of both Williams' mother and the musicians in his band, Sheppard was added to the band as an occasional singer and upright bass player. In December 1944, the two were married 10 days after the finalization of Sheppard's divorce from her first husband. The ceremony was performed by a justice of the peace at the officiant's gas station in Andalusia, Alabama.
Soon after their wedding, the new Mrs. Williams took the role of her husband's unofficial manager, a position previously held by her mother-in-law, Lillie Williams. The newlywed couple visited Nashville with the intent of meeting songwriter and music publisher Fred Rose of Acuff-Rose Publishing. The meeting resulted in Hank Williams recording two singles for Sterling Records: “Never Again” in December 1946 and “Honky Tonkin’” in February 1947. Both proved successful and a contract was signed with MGM Records in 1947, with Rose becoming the singer's official manager and record producer.
Williams, however, began to push for her own spot in the limelight. Country biographer Colin Escott wrote "Her duets with Hank were like an extension of their married life in that she fought him for dominance on every note." Having recorded several duets with her husband, Williams was featured on the recordings of "Lost on the River", "I Heard My Mother Praying for Me", "Dear Brother", "Jesus Remembered Me", "The Pale Horse and His Rider", "Jesus Died for Me", "Help Me Understand", Something Got a Hold of Me", "I Want to Live and Love", and "Where the Soul of Man Never Dies".
In early 1948, tension started to grow in Williams' marriage when her husband started to again abuse alcohol, a problem he brought with him to their marriage from the beginning. Williams left her husband, giving him the choice of alcohol or her. They would eventually reunite.
On May 26, 1949, Williams gave birth to the couple's only child together, Randall Hank Williams. Hank Williams later nicknamed the boy "Bocephus", after country entertainer Rod Brasfield's ventriloquist dummy. After Williams's appearance at the Grand Ole Opry following the birth of her son, she officially renamed the child Hank Williams, Jr. When her husband expressed a desire to adopt her daughter, Williams refused, fearing he would take her if they divorced.
On December 31, 1951, after allegations of mutual infidelities and the resumption of her husband's health problems , Williams called from a hotel and told him to be out of their Tennessee house by the time she returned. Replying to Williams with a seemingly prophetic statement, Hank Williams stated, "Audrey I won't live another year without you." On June 1952, the couple divorced. She was awarded the house and their child, as well as half of her ex-husband's future royalties on the condition that she never remarry. In 1953, months after Hank Sr.'s death, Williams paid his second wife, Billie Jean Jones, $30,000 to relinquish the title of "Hank Williams' Widow". Both women had been using the description professionally. Jones agreed to Williams' terms.
Williams and her son, Hank Jr., became estranged after he turned 18. She never remarried.
Outliving Hank, Sr. by 22 years, Williams died at the age of 52 on November 4, 1975, from heart failure related to her years of alcohol and drug abuse.