Gordon Brown has placed his former adviser Ed Balls in charge of a new department focusing on England's children, families and schools.
Ed Balls has three children
There will be another new department responsible for innovations, science, universities and skills, led by former Home Office minister John Denham.
The children's department will have a "co-ordinating role" on children's health, welfare and child poverty.
It will be called the Department for Children, Schools and Families (DCSF).
The old Department for Education and Skills has traditionally looked after children right through to university. Its Surestart programme offers support for families, including childcare and parenting classes.
In a ministerial statement setting out the structural changes to government departments, Gordon Brown said the new department would for the first time bring together "key aspects of policy affecting children and young people".
"The new department will play a strong role both in taking forward policy relating to children and young people, and coordinating and leading work across government on youth and family policy."
DEPARTMENT FOR CHILDREN, SCHOOLS AND FAMILIES
Youth and family policy
It "will assume responsibility for promoting the well-being, safety, protection and care of all young people - including through policy responsibility for children's social services", the statement said.
The department will take over the Respect agenda from the Home Office and "lead a new emphasis across government on the prevention of youth offending".
The man in charge of this new department, Ed Balls, was appointed Economic Secretary to the Treasury in May last year.
He joined the Commons in 2005, representing Normanton in West Yorkshire and is married to fellow minister Yvette Cooper MP.
He was born in 1967 and educated at the independent Nottingham High School, which is selective. He went on to Keble College, Oxford to study Politics, Philosophy and Economics and then to the John F Kennedy School of Government, Harvard.
DEPARTMENT OF INNOVATION, UNIVERSITIES AND SKILLS
Universities - teaching and research
John Denham left Tony Blair's government in protest over Iraq. He was born in 1953 and educated at Woodroffe Comprehensive School, Lyme Regis and Southampton University. He has three children.
His department will be called the Department of Innovations, Universities and Skills (DIUS). It has taken over the science and innovation sections of the DTI.
In his ministerial statement to the Commons, Gordon Brown said: "The new department will be responsible for driving forward delivery of the government's long-term vision to make Britain one of the best places in the world for science, research and innovation, and to deliver the ambition of a world-class skills base".
Reaction to the shake up has been largely favourable. The higher education body - Universities UK - supports the changes, which bring universities together with innovation and skills.
Its President, Drummond Bone, said: "This is an exciting and forward-looking move, which we welcome. Universities are key to the generation and exploitation of new knowledge in the UK, so there is a clear rationale for moving science and innovation to the new department.
John Denham was previously at the Home Office
"We look forward to working with the new prime minister and new secretary of state John Denham to deliver not only the ideas - but also the skills - the UK needs."
Head teachers and college leaders however, are concerned that colleges will be covered by both new departments.
Ed Balls will oversee the role of colleges in teaching the government's new diplomas for 14 to 19-year-olds.
But responsibility for the rest of the work of further education colleges will fall to John Denham.
John Dunford, general secretary of the Association of School and College Leaders, said: "It is wrong to split the department because colleges will be serving two departments.
"Having said that, it means that education has two places at Cabinet level - which can only be good."
The teachers' union the NASUWT said the changes raised many questions - particularly over the relationship between schools and skills - and that joined up thinking was essential.
General secretary Chris Keates said: "Having had four secretaries of state in almost as many years, yet another change comes as no real surprise. We now have two. Clearly they are multiplying to cope with the enormity of the education agenda".
Gordon Brown's statement announced that funding for 16 to 19 education - which includes a range of academic and vocational training - would in future go to schools and colleges via local authority education budgets, rather than via the Learning and Skills Council (LSC) as now.
John Brennan, the chief executive of the Association of Colleges, said: "We welcome the prime minister's bold decision to give special focus to skills with the establishment of this new department.
"It is of critical importance for young people, parents and employers that there should be coherence between pre and post-16 learning and skills and we look forward to working with the government to see how this can be delivered within the new structure."
The chief executive of the LSC, Mark Haysom, said: "We are working closely with our colleagues in government to understand the details of these departmental changes and their implications for the LSC.
"The LSC has achieved or exceeded every target set for it, and with record numbers of young people now in full-time education, we have much to be proud of."
The president of the National Union of Students, Gemma Tumelty, said: "Over the coming months and years, John Denham will face many challenges - not least as we approach the review on the current higher education funding arrangements.
"As a former student union president himself, we hope that he will remember the importance of student representation and consultation at every stage of this review."