The decision has, however, triggered a fresh standoff with Tata Trusts Chairman Noel Tata, who opposed the proposal at the board meeting.
Tata Trusts, which holds a 66 per cent stake in Tata Sons, has called the reappointment "legally void and without any basis".
Chandrasekaran's current five-year term is due to end on February 20, 2027.
Chandrasekaran agrees to reconsider decision
The Tata Sons board met on Thursday for the first time since Chandrasekaran publicly announced on August 12 that he would not offer himself for reappointment after his current tenure ends.
According to Tata Sons, Chandrasekaran agreed at Thursday's meeting to reconsider his decision following a request from the board.
"At the meeting of the Board on September 17, Chandra acceded to the Board's request to re-consider his decision," Tata Sons said in a statement.
The board subsequently voted by majority to reappoint him as Executive Chairman for another five-year term.
Reappointment proposal had been pending since February
Tata Sons said the board had agreed in principle in September 2025 to reappoint Chandrasekaran for another five years.
However, formal approval was required under applicable laws. When the matter came up for consideration in February 2026, the resolution was deferred in the absence of unanimity.
The issue was discussed again at board meetings in May and June but remained unresolved.
Against this backdrop, Chandrasekaran decided on August 12 not to offer himself for another term.
NRC asked Chandra to continue
The company's Nomination and Remuneration Committee (NRC) subsequently met on September 3 to discuss Chandrasekaran's decision and his possible reappointment.
Tata Sons said the committee, after deliberations and taking into account Chandrasekaran's contributions and the "larger interests of the Tata Group", unanimously requested him to reconsider his decision and recommended his reappointment to the board.
The board took up the matter on Thursday and approved the reappointment by majority vote.
Tata Trusts calls decision 'legally void'
The board's decision was immediately contested by Tata Trusts Chairman Noel Tata, who is one of the Trust-nominated directors on the Tata Sons board.
In a statement, Tata Trusts said Noel Tata voted against the proposal and argued that this rendered the board's decision legally invalid.
"Given that Mr Noel Tata, being one of the Trust nominee directors, voted against the proposal, it was rendered legally void and without any basis," the Trusts said.
Tata Trusts reiterated that Chandrasekaran's earlier decision not to continue beyond February 2027 had already been accepted and had therefore attained finality.
Tata Sons to seek RBI guidance
Tata Sons said its board had also decided to initiate steps to comply with applicable Reserve Bank of India guidelines.
The company said it would seek guidance from the RBI, Tata Trusts and other stakeholders on the compliance requirements relating to the reappointment.
The conflicting positions now leave Chandrasekaran's proposed second term at the centre of a significant governance dispute between the Tata Sons board and its largest shareholder.