John Hutton is to lead the revamped Department of Trade and Industry, now to be called the Department of Business and Enterprise.
John Hutton was a close ally of Tony Blair
Mr Hutton, who was previously pensions secretary, will take over a department whose future was rumoured to be uncertain under Gordon Brown.
But in the event, the DTI survived, with only minor changes in its remit.
Mr Hutton was a close ally of Tony Blair and had argued with Mr Brown over the issue of pensions.
Earlier reports suggested that the DTI might be dismantled, with energy going to the environment ministry and trade to the foreign office.
Mr Brown's decision to keep the department intact may owe something to his desire to cultivate closer links with the business community, and he is also expected to name a high-level business advisory council to liaise with the government.
The employers' organisation, the CBI, had been lobbying strongly against the break-up.
Allthough it will lose "innovation", the new Department of Business and Enterprise will still cover a vast range of topics, from support for small business to world trade talks to UK energy policy.
The department has been under fire from the Conservatives for wasting money, particularly in relation to its regional and small business support schemes.
It also faces challenges in how to shift UK energy policy towards a greener agenda to help meet the Kyoto targets for limiting greenhouse gases.
And with the world trade talks stalled, it will need to find new ways to boost Britain's economic role in an increasingly globalised world.
Mr Hutton was an ally of Mr Blair who owed his biggest promotion - to pensions secretary - to the unexpected resignation of David Blunkett in 2005.
He played a key role in the government's response to the Turner report, which advocated re-linking the state pension to earnings, as well as the creation of a new state pension saving scheme for individuals.
As such, he clashed with Mr Brown, who was concerned about the effects on public spending of increased state pensions.
Mr Hutton is the MP for Barrow and Furness in Cumbria, where he has a majority of just over 6,000, having been first elected in 1992.
He was educated at Westcliffe High School, Essex, and studied law at Magdalen College, Oxford, before becoming a lecturer in law at Newcastle Polytechnic.
He was a friend and flatmate of Alan Milburn, a close ally of Mr Blair, who was health secretary and then Labour's campaign manager for the 2005 general election.