The microblogging site will raise around $50m from the current round, according to technology blog TechCrunch. It reports Twitter has done a deal with Insight Venture Partners who are believed to be investing around $50m.
Insight Venture Partners have previously backed photosharing site Photobucket, which was sold to News Corp in 2007 for $250m.
The $1bn valuation is a significant increase since Twitter’s last round of fundraising in February which put the business at $250m. For comparison Facebook is currently valued at around £8bn.
Twitter’s fundraising comes shortly after the site announced changes to its terms and conditions that gives the site scope to run targeted ads on user’s pages.
Separately, Twitter has said there is a bug in the system where tweets, particularly from users with large numbers of followers, are not appearing.
In a statement Twitter said: "We are currently working on a critical bug whereby some tweets from users you follow may not appear in your timeline. This bug particularly affects the delivery of tweets from users you follow that themselves have a large number of followers.
"We plan on deploying the first part of the fix for this bug tomorrow morning and will update status thereafter."
The problem was highlighted by cyclist Lance Armstrong, who has just under 2 million followers. Armstrong has a reputation for blocking followers who do not agree with him said he had been inundated with messages from people asking if they had been blocked.
It has also been revealed that Twitter has also become popular with city traders. Around 90,000 have signed up to Stocktwits, a version of the site, which exchanges gossip and opinion.
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