diff -u b/core/modules/field/tests/modules/field_test/field_test.module b/core/modules/field/tests/modules/field_test/field_test.module
--- b/core/modules/field/tests/modules/field_test/field_test.module
+++ b/core/modules/field/tests/modules/field_test/field_test.module
@@ -156,14 +156,16 @@
 }
 
 /**
- * Implements hook_field_widget_settings_form_alter().
+ * Implements hook_field_widget_third_party_settings_form().
  */
-function field_test_field_widget_settings_form_alter(&$element, &$form_state, $context) {
-  $element['field_test_widget_settings_form_alter'] = array(
+function field_test_field_widget_third_party_settings_form($plugin, \Drupal\Core\Field\FieldDefinitionInterface $field_definition, $form_mode, $form, $form_state) {
+  $third_party_settings = $plugin->getSetting('third_party_settings');
+  $element['field_test_widget_third_party_settings_form'] = array(
     '#type' => 'textfield',
-    '#title' => t('Widget settings form alter'),
-    '#default_value' => $context['widget']->getSetting('field_test_widget_settings_form_alter'),
+    '#title' => t('3rd party widget settings form'),
+    '#default_value' => $third_party_settings['field_test'],
   );
+  return $element;
 }
 
 /**
@@ -178,11 +180,11 @@
  * Implements hook_field_formatter_third_party_settings_form().
  */
 function field_test_field_formatter_third_party_settings_form($plugin, \Drupal\Core\Field\FieldDefinitionInterface $field_definition, $view_mode, $form, $form_state) {
-  $third_party = $plugin->getSetting('third_party_settings');
+  $third_party_settings = $plugin->getSetting('third_party_settings');
   $element['field_test_field_formatter_third_party_settings_form'] = array(
     '#type' => 'textfield',
     '#title' => t('3rd party formatter settings form'),
-    '#default_value' => $third_party['field_test'],
+    '#default_value' => $third_party_settings['field_test'],
   );
   return $element;
 }
diff -u b/core/modules/field_ui/field_ui.api.php b/core/modules/field_ui/field_ui.api.php
--- b/core/modules/field_ui/field_ui.api.php
+++ b/core/modules/field_ui/field_ui.api.php
@@ -11,70 +11,78 @@
  */
 
 /**
- * Alters the formatter settings form.
+ * Allow modules to add settings to field formatters provided by other modules.
  *
  * @param object $plugin
- *   The widget or formatter.
+ *   The field formatter.
  * @param \Drupal\Core\Field\FieldDefinitionInterface $field_definition
  *   The field definition.
  * @param $view_mode
- *   The entity view or form mode.
+ *   The entity view mode.
  * @param array $form
  *   The The (entire) configuration form array.
  * @param array $form_state
  *   The form state.
  *
- *  @return array
- *    Returns the form array to be built.
+ * @return array
+ *   Returns the form array to be built.
  *
  * @see \Drupal\field_ui\DisplayOverView.
  */
 function hook_field_formatter_third_party_settings_form($plugin, \Drupal\Core\Field\FieldDefinitionInterface $field_definition, $view_mode, $form, $form_state) {
-  // Add a 'mysetting' checkbox to the settings form for 'foo_formatter'
-  // field formatters.
+  $element = array();
+  // Add a 'my_setting' checkbox to the settings form for 'foo_formatter' field
+  // formatters.
   if ($plugin->getPluginId() == 'foo_formatter') {
-    $third_party = $plugin->getSetting('third_party_settings');
+    $third_party_settings = $plugin->getSetting('third_party_settings');
     $element['my_setting'] = array(
       '#type' => 'checkbox',
       '#title' => t('My setting'),
-      '#default_value' => $third_party['my_setting'],
+      '#default_value' => $third_party_settings['my_setting'],
     );
   }
   return $element;
 }
 
 /**
- * Alters the widget settings form.
+ * Allow modules to add settings to field widgets provided by other modules.
  *
- * @param array $element
- *   Form array.
+ * @param object $plugin
+ *   The field widget.
+ * @param \Drupal\Core\Field\FieldDefinitionInterface $field_definition
+ *   The field definition.
+ * @param $form_mode
+ *   The entity form mode.
+ * @param array $form
+ *   The The (entire) configuration form array.
  * @param array $form_state
- *   The form state of the (entire) configuration form.
- * @param array $context
- *   An associative array with the following elements:
- *   - formatter: The formatter object.
- *   - field_definition: The field definition.
- *   - form_mode: The form mode being configured.
- *   - form: The (entire) configuration form array.
+ *   The form state.
+ *
+ * @return array
+ *   Returns the form array to be built.
  *
  * @see \Drupal\field_ui\FormDisplayOverView.
  */
-function hook_field_widget_settings_form_alter(&$element, &$form_state, $context) {
-  // Add a 'mysetting' checkbox to the settings form for 'foo_field' fields.
-  if ($context['field']['type'] == 'foo_field') {
-    $element['mysetting'] = array(
+function hook_field_widget_third_party_settings_form($plugin, \Drupal\Core\Field\FieldDefinitionInterface $field_definition, $form_mode, $form, $form_state) {
+  $element = array();
+  // Add a 'my_setting' checkbox to the settings form for 'foo_widget' field
+  // widgets.
+  if ($plugin->getPluginId() == 'foo_widget') {
+    $third_party_settings = $plugin->getSetting('third_party_settings');
+    $element['my_setting'] = array(
       '#type' => 'checkbox',
       '#title' => t('My setting'),
-      '#default_value' => $context['formatter']->getSetting('mysetting'),
+      '#default_value' => $third_party_settings['my_setting'],
     );
   }
+  return $element;
 }
 
 /**
  * Alters the field formatter settings summary.
  *
- * @param $summary
- *   The summary.
+ * @param array $summary
+ *   An array of summary messages.
  * @param $context
  *   An associative array with the following elements:
  *   - formatter: The formatter object.
@@ -87,7 +95,8 @@
   // Append a message to the summary when an instance of foo_formatter has
   // mysetting set to TRUE for the current view mode.
   if ($context['formatter']->getPluginId() == 'foo_formatter') {
-    if ($context['formatter']->getSetting('mysetting')) {
+    $third_party_settings = $plugin->getSetting('third_party_settings');
+    if (isset($third_party_settings['my_setting']) && $third_party_settings['my_setting']) {
       $summary[] = t('My setting enabled.');
     }
   }
@@ -97,7 +106,7 @@
  * Alters the field widget settings summary.
  *
  * @param array $summary
- *   The summary.
+ *   An array of summary messages.
  * @param array $context
  *   An associative array with the following elements:
  *   - widget: The widget object.
@@ -107,10 +116,11 @@
  * @see \Drupal\field_ui\FormDisplayOverView.
  */
 function hook_field_widget_settings_summary_alter(&$summary, $context) {
-  // Append a message to the summary when an instance of foo_field has
+  // Append a message to the summary when an instance of foo_widget has
   // mysetting set to TRUE for the current view mode.
-  if ($context['field']['type'] == 'foo_field') {
-    if ($context['widget']->getSetting('mysetting')) {
+  if ($context['widget']->getPluginId() == 'foo_widget') {
+    $third_party_settings = $plugin->getSetting('third_party_settings');
+    if (isset($third_party_settings['my_setting']) && $third_party_settings['my_setting']) {
       $summary[] = t('My setting enabled.');
     }
   }
diff -u b/core/modules/field_ui/src/FormDisplayOverview.php b/core/modules/field_ui/src/FormDisplayOverview.php
--- b/core/modules/field_ui/src/FormDisplayOverview.php
+++ b/core/modules/field_ui/src/FormDisplayOverview.php
@@ -183,14 +183,18 @@
    * {@inheritdoc}
    */
   protected function alterSettingsForm(array &$settings_form, $plugin, FieldDefinitionInterface $field_definition, array $form, array &$form_state) {
-    $context = array(
-      'widget' => $plugin,
-      'field_definition' => $field_definition,
-      'form_mode' => $this->mode,
-      'form' => $form,
-    );
-    $this->moduleHandler->alter('field_widget_settings_form', $settings_form, $form_state, $context);
-    $settings_form = array('widget' => $settings_form);
+    // Iterate through the modules calling their
+    // field_widget_third_party_settings_form handlers (if any):
+    foreach ($this->moduleHandler->getImplementations('field_widget_third_party_settings_form') as $module) {
+      // Index the settings form by module name.
+      $settings_form['third_party'][$module] = $this->moduleHandler->invoke($module, 'field_widget_third_party_settings_form', array(
+        $plugin,
+        $field_definition,
+        $this->mode,
+        $form,
+        $form_state,
+      ));
+    }
   }
 
   /**
diff -u b/core/modules/field_ui/src/Tests/ManageDisplayTest.php b/core/modules/field_ui/src/Tests/ManageDisplayTest.php
--- b/core/modules/field_ui/src/Tests/ManageDisplayTest.php
+++ b/core/modules/field_ui/src/Tests/ManageDisplayTest.php
@@ -106,7 +106,7 @@
     $edit = array($fieldname => 'foo');
     $this->drupalPostAjaxForm(NULL, $edit, "field_test_plugin_settings_update");
 
-    // Confirm that the third_party_settings settings are not updated on the settings form.
+    // Confirm that the third party settings are not updated on the settings form.
     $this->drupalPostAjaxForm(NULL, array(), "field_test_settings_edit");
     $this->assertFieldByName($fieldname, '');
 
@@ -193,9 +193,9 @@
     $this->drupalPostAjaxForm(NULL, array(), "field_test_settings_edit");
 
     // Assert that the field added in
-    // field_test_field_widget_settings_form_alter() is present.
-    $fieldname = 'fields[field_test][settings_edit_form][settings][widget][field_test_widget_settings_form_alter]';
-    $this->assertField($fieldname, 'The field added in hook_field_widget_settings_form_alter() is present on the settings form.');
+    // field_test_field_widget_third_party_settings_form() is present.
+    $fieldname = 'fields[field_test][settings_edit_form][third_party][field_test][field_test_field_widget_third_party_settings_form]';
+    $this->assertField($fieldname, 'The field added in hook_field_widget_third_party_settings_form() is present on the settings form.');
     $edit = array($fieldname => 'foo');
     $this->drupalPostAjaxForm(NULL, $edit, "field_test_plugin_settings_update");