Ex-Cabinet minister John Redwood is joining the Tory shadow cabinet as Michael Howard re-jigs his team.
Redwood was once in the Cabinet as Welsh Secretary
Mr Redwood is the new deregulation secretary in a larger shadow cabinet.
The move means shadow defence secretary Nicholas Soames and policy chief David Cameron will be part of the Tory top team, but in their current jobs.
Labour says Mr Redwood's return shifts makes the Tories "extreme" but Mr Howard contrasted his changes with
"bickering" over No 10's reshuffle.
The reshuffle sees shadow transport secretary Damian Green and shadow international development secretary John Bercow leave the Tory front bench.
It is thought they were turned down offers of alternative jobs.
The last Tory reshuffle only happened in June and the timing of the new changes is being seen as calculated to cause embarrassment to Mr Blair, who is still discussing his reshuffle.
KEY TORY CHANGES
Joining shadow cabinet: John Redwood, Nicholas Soames, David Cameron
Moving up: George Osborne, Alan Duncan, James Paice
Out: Damian Green, John Bercow
Mr Howard said the changes would strengthen his team in the run-up to the general election, which is widely expected next spring.
"While the endless bickering between the prime minister and the chancellor has split the Labour Party and paralysed the government, a united Conservative Party is continuing to get on with the job of putting forward bold and imaginative policies," he said.
The Tory leader boasted that his team was ready to take on Labour whenever Mr Blair had the "courage to call the election".
George Osborne, James Paice and Alan Duncan were among those rising the ranks.
Mr Redwood gets a high profile role in spearheading the Tory campaign against red tape in business and the public services.
Damian Green is leaving the Tory front bench
Tory chairman Liam Fox said Mr Redwood, a right-winger who challenged John Major for the Tory leadership in 1995, would provide "intellectual firepower".
And bringing Mr Soames into the shadow cabinet underlined the importance the party was giving to defence and security, he told BBC News 24.
Mr Redwood toured the studios taking on the UK Independence Party before the June European elections.
He told BBC 2's Newsnight his views on Europe might have played a part in his appointment as the Tories opposed the proposed European constitution.
Mr Redwood said he would not be shadowing any particular government minister.
Instead, he would be working with other shadow cabinet ministers to "fashion a policy out of the idea of
slimmer government and less regulation".
The reshuffle expands Mr Howard's shadow cabinet from 14 to 17.
Mr Howard began his leadership by halving his top team to 12 and Liberal Democrat chairman Matthew Taylor said that "mini cabinet" idea has obviously been dumped.
Mr Taylor said the Tories must be desperate to bring back Mr Redwood.
"Let's face it - not even Conservative MPs believe John Redwood can save them," he said.
Deputy Prime Minister John Prescott said the reshuffle made the Tories "more extreme than ever".
"Howard has sacked the remaining Tory modernisers who were seeking to claw their party back to the centre ground and replaced them with figures from the Tory hard right," said Mr Prescott.
"If there was any further evidence needed that Michael Howard was stuck in a failed past then it is his appointment of John Redwood to the Tory frontbench."
Other Tory changes include:
- George Osborne, a former adviser to William Hague, becomes shadow chief secretary to the Treasury
- Alan Duncan is the new shadow international development secretary
David Cameron is seen as a Tory rising star
- Shadow environment secretary Tim Yeo adds Mr Green's transport brief to his responsibilities
- Oliver Heald, the shadow Commons leader, takes on the extra role of constitutional affairs spokesman
- Shadow agriculture, fisheries and food secretary John Whittingdale takes over from Julie Kirkbride at culture.
- Ms Kirkbride joins the foreign affairs team, as do Graham Brady and Mark Simmonds
- James Paice becomes the new shadow agriculture secretary, with Andrew Mitchell replacing him on the home affairs team
- Hugh Robertson becomes a frontbench spokesman on sport
- Oliver Letwin's economic affairs team is joined by Richard Spring and Mark Francois.
- Shadow chief secretary to the Treasury Howard Flight moves to become the "special envoy" to the City of London in an effort to boost support from business
- Andrew Robathan enters the new defence team while Desmond Swayne becomes one of Mr Howard's parliamentary private secretaries.