White House chief-of-staff Andrew Card has resigned and will be replaced by budget director Josh Bolten.
Mr Bush said Mr Card was returning to private life
The move was announced by US President George W Bush.
He said Mr Card, 58, had suggested earlier this month leaving the post that he had held since Mr Bush's first day in office.
The move comes amid a sharp drop in Mr Bush's approval ratings and calls for him to bring in "new blood", a BBC correspondent says.
Republicans have for months argued that the Bush administration fumbled a number of key issues and high-profile changes were needed, the BBC's James Westhead in Washington says.
"I'm honoured to have served with Andy Card," President Bush said in Washington, standing alongside with Mr Card and Mr Bolten.
"I have great confidence in my next White House chief-of-staff," he said, adding that the next three years "will demand much of those who serve our country."
"We have a global war to fight and win," the president said.
Mr Card had served in the administrations of Presidents George Bush Sr and Ronald Reagan.
He is widely respected by his colleagues who fondly call him the "chief", the Associated Press news agency said.
President Bush said Mr Card was returning to private life, without giving any further details.
Mr Bolten, 50, has been budget director at the White House since 2003. He served as deputy chief-of-staff for policy in 2001-03.
He had also served in the administration of President George Bush Sr.
Mr Card is expected to stay in his job until 14 April.