Murthy, poster-boy of India's IT success, will replace current chairman K V Kamath, who will become lead independent director, effective today.
The current executive co-chairman S Gopalakrishnan will be re-designated executive vice chairman while S D Shibulal, who was one of the seven engineers to launch the company in 1981 by pooling together USD 250, will continue as Chief Executive Officer (CEO).
Stating that is was "very unusual" for him to be back at Infosys, Murthy, who will turn 67 in August, said the company faced challenging times but did not elaborate.
He said he would "add value" to Shibulal's role and that the company should focus on large application development, maintenance and independent validation services.
Infosys board re-appointed Murthy, who retired from the company in August 2011 to become chairman emeritus, for five years from June 1.
"The board has taken this step keeping in mind the challenges that the technology industry and the company faces," Kamath said acknowledging calls from shareholders to strengthen executive leadership of the company.
Murthy said his son Rohan will have no leadership role in the company.
India's second-biggest software-services provider has struggled in the past two years as its big customers in the US and Europe cut costs and has lagged behind Tata Consultancy Services and smaller rivals HCL Technologies and Wipro in competing for orders.
The company in April posted sales that fell short of its own forecast amid a spending slowdown in North America and Europe.