Mr Murdoch said he was confident of future success at Fox
Fox movie and broadcast firm is to "report directly" to News Corporation supremo Rupert Murdoch from the summer.
It comes as Peter Chernin has handed in his resignation as chief operating officer of News Corporation and as Los Angeles-based Fox's chief executive.
Mr Chermin, who had been renegotiating a contract that was due to run out on 30 June, will now leave on that date.
In a statement, News Corp said Mr Chernin would launch a Fox-based movie production company later this year.
Mr Chernin will be under a six-year deal that calls for him to produce movies and TV shows for Fox, which must buy at least two movies a year from him, News Corp spokeswoman Julie Henderson said.
She added that Mr Chernin would get a fee "at least as favourable as the most favourable agreement" that the studio has with other producers.
Meanwhile, it is not known how long Mr Murdoch will remain in the Fox post or how involved he will be.
It has been mooted that his son James Murdoch will eventually take over from the 77-year-old as News Corp chief executive.
Mr Chermin had been Mr Murdoch's right-hand man in Hollywood for more than a decade.
One commentator believes Mr Chernin's ambition to ascend to the top of News Corp got in the way of Mr Murdoch's desire to have a family member take control.
"I think Rupert decided he was going to bite that bullet because he didn't want Peter standing in the way of his children," said Michael Wolff, a Vanity Fair columnist and author of The Man Who Owns The News: Inside the Secret World of Rupert Murdoch, which was published in December.
In a statement, Mr Murdoch said: "Peter's contributions to the company over the past two decades have been immeasurable.
"We are fortunate to have such a strong and seasoned group of leaders at our Fox companies and we are confident that our success will continue."
Mr Chernin said the decision had been a "difficult" one to make.
Earlier this month, News Corp reported a $6.4bn (£4.4bn) quarterly loss, as falling advertising revenues forced it to cut $8.4bn from the value of assets.
Revenues at the firm, which owns BSkyB, 20th Century Fox, and the New York Post and Sun newspapers, were down 8.4%.
News Corp's main other businesses include publisher HarperCollins and social networking website MySpace.