Torres heads into Sunday's Premier League match against his former club at Stamford Bridge having convinced his manager he is over his initial difficulties in adjusting to a new team and surroundings.
The Spain international was quoted during the international break as saying his move to London from Liverpool was difficult because the city was too big to manage and there was a lack of fellow Spanish speakers at Chelsea.
Torres last scored a goal in the Premier League almost two months ago, but his progress has been hampered by a three-match suspension following a red card against Swansea on September 24.
But Villas-Boas believes his forward has improved greatly from last season, when he struggled for form following a £50million transfer from Anfield last January.
"I think Fernando has, of course, picked up from last season not only with his form, physically, but also his availability and movement for the team," said Villas-Boas.
"He is back to his old sharpness and goal-scoring form. We're pretty happy with the way he's performed.
"We just have to make a decision on our front-line, but Fernando will always be in contention."
Liverpool head into the game three points shy of Chelsea, who are in fourth place in the Premier League table.
And Villas-Boas pointed to the large investment in players made by Liverpool's owners as evidence that they should be regarded as contenders for the Premier League title.
Liverpool have not won a league title since 1990, but have spent over £100million this calendar year, bringing in the likes of Andy Carroll, Luis Suarez, Jordan Henderson and Stewart Downing.
And Villas-Boas said: "I have always assumed that (Liverpool are title contenders) because it has been assumed by them to do that.
"Kenny (Dalglish) has made the necessary changes to Liverpool for them to be title contenders.
"The seven people he has brought in represents the level of commitment and investment the ownership have to putting the club back to title-winning ways."
Didier Drogba is back in contention for Chelsea following a three-match suspension, during which time he had an operation on his elbow to remove a metal plate.
Dalglish, meanwhile, believes Chelsea represent major obstacles in Liverpool's pursuit of an inaugural Premier League title.
Liverpool won last season's corresponding fixture 1-0 with Raul Meireles scoring the winner and Dalglish said: "We've got to go there and do our best to earn a result as positive as last season.
"We got our reward at Stamford Bridge last season but it's a different day and a different season.
"It's a difficult game - but it's a difficult game for Chelsea as well. I wouldn't expect them to be too far away (from the top) at the end of the season.
"It's up to them how close they get. I'm not really concerned about that because we want to get ourselves up there as well. But I'm sure they won't be too far away."
Jamie Carragher is available after recovering from a calf problem, but Steven Gerrard remains out. Dalglish reported no new injury concerns from his returning international players.
Source: AFP
Source: AFP