John Reid has been appointed as the new health secretary in a dramatic cabinet shake-up which ends the historic post of lord chancellor.
Reid gets his first office of state
Details of the reshuffle were announced hours after Alan Milburn shocked the political world by quitting as health secretary.
Mr Milburn's decision to resign - citing family reasons - prompted the promotion of Dr Reid from his role as Leader of the Commons.
New Health Secretary: John Reid
New Leader of the Commons: Peter Hain
Lord Falconer heads new Department of Constitutional Affairs
Meanwhile, Lord Irvine has retired as lord chancellor as expected - and Tony Blair has used his departure to bring his former flatmate Lord Falconer into the cabinet to head up a new department of constitutional affairs.
The new department will incorporate Lord Irvine's responsibilities and take over the roles of the Scottish and Welsh offices.
The end of the post of lord chancellor - a title older than that of prime minister - brings to a close centuries of British history.
Civil liberties campaigners welcomed the changes, which include establishing a new supreme court and a new commission to appoint judges.
But critics say even Lord Irvine is not happy with the piecemeal way they are being carried through and that he fears for judges' independence.
Former Conservative Attorney-General Sir Nicholas Lyell said controls to hold the government to account over keeping judges independent risked being weakened.
In other changes, Scottish Secretary Helen Liddell is also to leave the cabinet after telling the prime minister she wanted to "reclaim" her private life.
Transport Secretary Alistair Darling will represent Scotland at Westminster.
Peter Hain - the current Welsh secretary - takes over from Mr Reid as Commons' leader and he will also speak on issues relating to Wales.
Plaid Cymru, as well as the Tories and Liberal Democrats, criticised the abolition of the Wales Office, saying it would give the country less of a voice.
Health Secretary Alan Milburn quits
Lord Chancellor Lord Irvine steps down
Scottish Secretary Helen Liddell leaves government
Energy Minister Brian Wilson resigns
The big shock of the day was Mr Milburn's resignation, a move that confounded the predictions of all the pundits.
The Darlington MP told BBC News he had decided to leave the government because the demands of the job conflicted with having a young family in the north east.
Speculation had been rife that there would be changes in the cabinet but no-one predicted such a key moderniser would leave the government.
Despite fighting a series of tough political battles in recent months, particularly over foundation hospitals, Mr Milburn said his career had to take second place to his two young sons and his partner Ruth.
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He told BBC News: "They'll be all sorts of weird and wonderful conspiracy theories, whether they are political, sexual, financial or whatever...
"It has nothing to do with any of that. It's just about a very, very straight forward personal choice that I've had to make."
The decision to appoint Dr Reid, a cabinet heavyweight, as the new health secretary is being seen as a sign Mr Blair wants to keep up the reform agenda on health.
Taking up his fourth job in less than a year, Dr Reid said: "It's a huge challenge and a big job. We want to deliver an ever better national health service for the people of this country."
There has been criticism that Dr Reid is a Scottish MP who will be deciding health issues in England alone.
Senior Lib Dem Menzies Campbell said that Mr Milburn's departure weakened the prime minister.
That view was echoed by senior Labour backbencher Ian Gibson who said: "He's lost Mandelson, he's lost Stevie Byers, Estelle Morris was a star too and now Milburn. The team is falling apart, it seems."
More details of changes in the middle ranks of government are expected on Friday.
Cabinet Office Minister Lord Macdonald had already announced he was retiring.
And on Thursday, Energy Minister Brian Wilson said he was "looking
forward to a more normal life" as he stepped down.