 "Jack Dorsey")
Dorsey's appointment ends months of speculation about who will take the reins at Twitter. The 38-year-old has been running the microblogging service since former CEO Dick Costolo stepped down on July 1.
He will, however, relinquish one responsibility: Dorsey will no longer be chairman, a move that Twitter says will help him to divide his time between the two companies. Twitter will recruit its next chairman from outside the company.
"To further simplify the demands on his time as well as to make sure we bring a fresh voice and new leadership to the board, the board has decided to separate the chair and CEO roles," lead independent director Peter Currie said on a call.
Twitter's shares were up 1 percent to $26.60 in early trading on Monday.
Twitter is working to rekindle growth after its latest quarterly results revealed the slowest rise in monthly average users since the company went public in 2013 - a performance that Dorsey at the time called "unacceptable."
Some investors had expressed concerns about whether Dorsey could run both Twitter and Square, which he also co-founded. Square is expected to go public later this year and Dorsey may have to devote substantial time courting investors for the IPO.
But others say Dorsey can do both jobs and is a more effective leader now than in 2008, when he was fired from his first stint as Twitter CEO.
Initially, Dorsey appeared to have been excluded from running Twitter after the company said its CEO job would be full-time.
"We assumed we would only consider a candidate who could make an undivided commitment to be our CEO," Currie said. "But over time it became apparent to us that Jack was not just meeting but surpassing the expectations we had of him as interim CEO while also running Square."
Tech news website Re/code first reported Dorsey's permanent appointment last week. Dorsey will remain on Twitter's board. Costolo resigned from the board on Sept. 30.
Adam Bain, previously Twitter's president and head of revenue and once considered a favorite for the top job, was named chief operating officer.
Investors and analysts have lauded faster product rollouts at Twitter since Dorsey took the helm in July.
Those include a widely available "buy now" button that allows users to make purchases directly through Twitter; Project Lightning, expected to roll out later this year and which would allow users to follow live events through selected tweets and photos; and a partnership with Square that lets users to make political donations through Twitter.
Twitter said it had no plans to provide Dorsey with direct compensation for his role as CEO.
