Jeremy Hunt has been promoted to Health Secretary as the line-up of David Cameron's reshuffled Cabinet began to take shape.
The senior Tory, who came under huge pressure as Culture Secretary earlier this year over his role in the BSkyB takeover bid, replaces Andrew Lansley who becomes Commons leader. Maria Miller has replaced Mr Hunt.
It is the most significant element to be revealed so far of a wide-ranging shake-up of the top team that also saw Ken Clarke replaced as Justice Secretary by employment minister Chris Grayling.
The veteran former chancellor has accepted a roving "wise head" role within the Cabinet.
Mr Clarke denied that his demotion was a humiliation, telling reporters: "Being offered a job in the Cabinet at my age - don't be daft."
The first appointment of the reshuffle was Andrew Mitchell as the new chief whip - a move confirmed late on Monday.
There was also a promotion for Theresa Villiers, who replaces Owen Paterson as Northern Ireland Secretary - but several female colleagues were ousted from their roles.
Conservative co-chairman Baroness Warsi, Welsh Secretary Cheryl Gillan and Environment Secretary Caroline Spelman have all departed.
Justine Greening has been appointed International Development Secretary and Patrick McLoughlin replaces her as Transport Secretary.
While the changes are extensive, the most senior Cabinet positions are unchanged, with the Prime Minister confirming he would keep Iain Duncan Smith and Michael Gove in place.
All of the Liberal Democrats' Cabinet ministers will also keep their jobs.