The move comes about six months after Williams relinquished his CEO role to Dick Costolo to focus on product development, the area that Williams said at the time is the one he was most interested in.
"Twitter is pleased to announce that Jack Dorsey has agreed to return to Twitter in an everyday role to lead our product development," said Twitter spokeswoman Carolyn Penner via e-mail.
Dorsey will also continue as CEO of Square, an e-payment company he founded after stepping away from Twitter.
Penner noted that Twitter's three co-founders -- Williams, Dorsey and Biz Stone -- have "unselfishly" worn different hats since the company's launch in 2006, based on Twitter's changing needs.
"As executive chairman [of product development], Jack will dive in to work with more than 450 people, led by an experienced executive team. The timing is fortuitous; not only is Twitter experiencing record growth, but we also now have a new infrastructure that will keep us ahead of that growth and enable us to launch products that will make Twitter more instant, simple and always present," Penner added, referring to a massive infrastructure upgrade and migration Twitter wrapped up last week.
That new infrastructure is expected to cut down on Twitter's site outages, slowdowns and bugs, while providing a sturdier and more flexible platform to develop new features and scale capacity more quickly.
Dorsey also posted a message on his Twitter account, saying he was "thrilled" with his return to the company as product development chief.
Williams, who will remain on Twitter's board, is developing an idea for a new startup company, and for that reason has been spending less time at Twitter lately, according to anonymous sources quoted by The New York Times.
Now that it may have put its notoriously spotty uptime and availability problems behind it, Twitter faces the challenge of generating advertising revenue that is proportional to its skyrocketing popularity. Twitter launched its Promoted Tweets advertising program about a year ago.
Ultimately it doesn't much matter which co-founder is in charge of product development as long as the company makes this advertising program work successfully, said IDC analyst Al Hilwa.
"Figuring who best does what is part of what it means to grow and mature. Twitter has been on an incredible trajectory in the last couple of years and its key challenge is finding monetization streams to pay for the immense infrastructure needed to keep up with the escalating volume of tweets," Hilwa said via e-mail.
Twitter is also going through a tough time with many of the third-party developers who have created applications for the microblogging service. After having a laissez-faire attitude for years, Twitter in the past year has become much more active in policing third-party applications to make sure they comply with its terms of service. Twitter has also become a competitor to some of these developers by building native features that were previously provided by external applications.
