Mr Crofton's appeal against his dismissal in March was unconditionally upheld by a five-member panel.
Earlier this week he had not yet been allowed to return to the town hall because a suspension, imposed before he was dismissed, had not been lifted. Mr Crofton and chief executive Tony Elliston were due to meet yesterday to discuss his return.
Charges of racial harassment were brought against Mr Crofton by the head of personnel, Sam Yeboah, after Mr Crofton accused him of failing to investigate reports of fraud among Hackney staff.
Mr Yeboah was sent home last week on compassionate grounds.
Mr Crofton said he wanted to stay until the department is in 'good shape', and oversee the introduction of CCT. The housing management contract has not yet been awarded, and the housing revenue account is £8 million in deficit.