Chambers won the 60 metres trial race at Sheffield last weekend which under UKA selection procedures should have guaranteed him an automatic place.
But UKA, in an information letter sent to athletes prior to Christmas, included an "exceptional circumstances" ruling, whereby they could have omitted him.
Nick Collins, the athlete's solicitor had already said before today's announcement they would take UKA to the High Court for "restraint of trade" if he were omitted.
However Chambers this afternoon was given the all-clear by the selectors to wear a British vest for the first time since the 2006 European Championships.
After announcing that Chambers was in the team, UKA's World Indoors selection committee issued a strongly-worded statement.
It said: "Based on his performance at the Norwich Union World Trials, the Selection Committee has selected Dwain Chambers for a place in the 60 metres at the 2008 World Indoors in Valencia.
"In taking this action, however, the selectors wished to issue a statement, which made clear their concerns.
"The Committee was unanimous in its desire not to select Dwain. Taking him to the World Indoors deprives young, upwardly mobile committed athletes of this key development opportunity.
"Our World Class Performance Programme is focused on achievement at Olympic and World level. On this basis, it is extremely frustrating to leave young athletes at home; eligible for Beijing, in possession of the qualifying standard and committed to ongoing participation in a drug-free sport.
"In contrast, we have to take an individual whose sudden return, especially when considered against his previous actions and comments, suggests that he may be using the whole process for his own ends."
The statement continued: "Unfortunately, the committee felt that the selection criteria pertaining to the winner of the Trials, coupled with the manner of Dwain's performance, left them no room to take any other decision.
"We wish all the selected athletes well at the event, but will certainly explore ways in which future selections can be made to match the true "spirit" of our sport."
Just weeks after returning from a two-year drugs suspension, Chambers reached the 100m final at the European Championships in Gothenburg, finishing seventh.
Then, as a stand-in for an injury-depleted 4x100m relay team, he ran the first leg as they claimed the gold medal in the Ulleval stadium.
UKA performance director Dave Collins acclaimed Chambers' performances in Sweden, praising his inspiration and the experience he offered to younger athletes.
But after making a second return to athletics, the 29-year-old former drug cheat now finds himself out of favour with the governing body and particularly its chief executive Niels de Vos.
The selectors, claiming to be looking towards the future, have made it very plain Chambers does not figure in their plans in the build-up to the 2012 Olympic Games in particular.
De Vos initially banned Chambers from competing in the trials, claiming he must undergo an extensive period of drug testing.
His understanding was that by coming off UK Sport's testing register when pursuing an American football career last year, Chambers made himself ineligible to compete for his country for 12 months.
The International Association of Athletics Federation (IAAF) overruled this decision and UKA reluctantly allowed Chambers to compete in the trials.
De Vos, however, is determined to amend UKA's Athletics Constitution and prevent any athlete who has committed an anti-doping violation from competing in British colours.
UKA performance director Dave Collins told Sky Sports News: "Dwain will be part of the team, now that he has been selected, that's it.
"As someone does with every athlete who is selected on this team, Dwain knows my stance and he has known of my stance for quite a while.
"But he will be a full member of my team and we will do our professional job to support him to do the best that he possibly can.
"It's just our wish that we were in a situation to use this event as part of our development process towards the Olympics."
Asked how Chambers had reacted to being included, Collins added: "Dwain was pleased. He said thank you, we talked through a couple of the issues, I reassured him about our support, I wished him the best.
"It isn't a personal thing between myself and Dwain, or between anybody here and Dwain, this is about what athletics needs to do to push forwards and to reassure the confidence of the public that when they see a performance, that they are seeing a kosher, genuine performance.
"We have a set of rules, those rules are to a certain extent laid down to us by the IAAF, that's what we have to go with. Were we not to have followed those rules we would have faced legal challenge, which as far as I understand would probably have meant a reinstatement anyway."
Frank Dick, who yesterday expressed his concern UKA would be in breach of IAAF and World Anti-Doping Agency (WADA) regulations, had mixed reactions.
"I am not happy for two reasons - that in the first place Dwain broke the (anti-doping) rules by using drugs," the former head coach of British athletics said.
"Secondly if UKA had continued to test Dwain this crisis could have been averted - he never retired and is therefore eligible to compete."
Dick added: "I am happy that UKA kept to the rules and selected Dwain. If we hadn't it would have shamed athletics.
"I am pleased Niels de Vos is leading a campaign to counter drug cheats and I believe this will help drive along the IAAF in its bid to rid the sport of cheats."
Nick Collins, head of the sports law department at Ford & Warren, the Leeds-based solicitors for Chambers, said: "I am obviously pleased that the only possible decision in law has been made. We are pleased that Mr De Vos and the selection team have come to the decision they have.
"It honours the tradition of the English legal system that when an offender has paid his penalty he starts again with a clean sheet.
"Dwain now has his clean sheet and a clean start. Perhaps now people will be generous enough to give him that fresh start. We are sure that sports lovers will applaud this selection. We wish Dwain well at the weekend."
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