Step 1: Understand the problem.
The area of a rectangle inscribed in a circle is maximized when the rectangle is a square. The diagonal of the square is the diameter of the circle.
Step 2: Use the relationship between the diagonal and the sides of the square.
For a square inscribed in a circle, the diagonal is equal to the diameter of the circle, which is \( 2r \). The sides of the square, \( s \), satisfy:
\[
s \sqrt{2} = 2r
\]
Thus:
\[
s = \frac{2r}{\sqrt{2}} = \sqrt{2}r
\]
Step 3: Conclusion.
The dimensions of the rectangle with maximum area are \( \sqrt{2}r \) units by \( \sqrt{2}r \) units.