Tony Blair is facing criticism for using his reshuffle to appoint one of his policy advisers as a minister.
Mr Blair's appointments have attracted controversy
Andrew Adonis, said to be the driving force behind the controversial top-up fees policy, has been given a peerage and a job in the education department.
The Liberal Democrats' Phil Willis called it "the most appalling appointment" of an "unelected crony".
Other appointments include former immigration minister Beverley Hughes who had to quit after a visa row.
Ms Hughes, who becomes children's minister, stepped down last year after "unwittingly" misleading people over her knowledge of lax visa checks on Romanian and Bulgarian applicants.
But it was Mr Adonis' appointment which has attracted the ire of Mr Willis, his party's education spokesman - partly because of his involvement in controversial policies like top-up fees, city academies and foundation schools.
"This is a man who has consistently undermined successive ministers and successive secretaries of state," Mr Willis told the BBC Radio 4's Today programme.
"He has been Tony Blair's henchman in the Department for Education and Skills, actually running education policy from the Number 10 policy unit.
"This is a man who has had no dialogue at all with the teaching profession, with parents, with other organisations, but has wielded unprecedented power, taking ideas direct from the US and implanting them in the British education system."
Mr Willis added: "If we are actually saying that, with a majority that is still well over 60, Tony Blair can't find one of his elected MPs as an education minister, then, my goodness, the government is in a sorry state."
Ruth Kelly, who stays as Education Secretary, said she was "delighted" to have Mr Adonis in her team - and rejected as "nonsense" reports that she had been in line for a demotion to the Treasury.
"I have known Andrew for years ... He is clearly a man of immense intellect, passion, commitment to the cause of education and social justice," she said.
She added: "There has been an awful lot of nonsense talked about this - I'm really pleased to be back."
And Labour MP Barry Sheerman, chairman of the Commons education committee in the last Parliament, defended Mr Adonis' appointment.
Tony Blair and Gordon Brown met new Labour MPs in Westminster
He said it was not unusual to take someone like Mr Adonis and put them in the House of Lords with a job.
"Adonis knows more about education than almost anybody around," he told Today.
"I would have thought that the strengths that Andrew brings to the job would have been very useful to any government that wants to implement a whole range of policies that are good for our education system."
Mr Blair, who met new Labour MPs in Westminster on Monday, published the final details of his ministerial team, following last Thursday's general election.
11 May: MPs sworn in
11 May: Meeting of PLP
17 May: Queen's Speech
29 May: French referendum on EU Constitution
1 July: Britain takes over EU presidency
6-8 July: Britain hosts G8 summit
25-29 Sep: Labour Party Conference
BBC Political Editor Andrew Marr said the reshuffle showed Mr Blair had defied his critics.
"In his third term you see the prime minister saying: 'Well I don't care what the critics are saying - I'm going to have around me in key jobs people I personally trust and feel close to' and that will have a reaction in other parts of the Labour movement, no doubt about it," Marr said.
In other moves, Harriet Harman goes to the Department of Constitutional Affairs. She is replaced as solicitor general by Mike O'Brien.
Lord Hunt, a health minister who quit over the Iraq war, is being given a job in the Department for Work and Pensions.
Margaret Hodge, replaced by Ms Hughes, is to become minister for work. Kim Howells becomes minister for the Middle East.
There was no job for Ed Balls, formerly a key adviser to Gordon Brown, but now an MP in his own right, but wife Yvette Cooper is promoted to minister for housing and planning.
Among the most prominent names leaving the government are local government minister Nick Raynsford, Foreign Office minister Chris Mullin and Northern Ireland minister John Spellar.
NEW LOOK COMMONS
A record 127 MPs are women
Labour has 97, Tories 17, Lib Dems 10, Sinn Fein 1, UUP 1, DUP 1
15 ethnic minority MPs, two Tory, 13 Labour
Youngest MP is Lib Dem Jo Swinson, 25
Oldest MP is Labour's Piara Khabra who is 80
Ex-Tory MP Shaun Woodward, who defected to Labour before the 2001 general election, gets a job in Northern Ireland.
Lord Drayson, who made a fortune in the pharmaceuticals industry and has given millions to Labour, is to be a junior minister in the Ministry of Defence. He was nominated to be a peer by Mr Blair in 2004.
That ministerial appointment prompted criticism from shadow defence minister Gerald Howarth, who said: "It appears Lord Drayson's reward for giving £500,000 to the Labour Party is a job in the Ministry of Defence.
"It is clear Mr Blair's style of government has not changed. New Labour rewards old donors."
Earlier on Monday, several former Cabinet ministers were among those urging Mr Blair to stand aside in months, not years, after Labour lost 47 seats at the general election.