David Blunkett has returned to the Cabinet as work and pensions secretary after Tony Blair's historic third successive election victory.
Blunkett arrives in Downing Street
Other changes see Patricia Hewitt move to health, John Reid switch to defence and Geoff Hoon becoming Commons leader.
Chancellor Gordon Brown, Foreign Secretary Jack Straw and Home Secretary Charles Clarke remain in their posts.
The new team will "focus relentlessly" on people's priorities, said Mr Blair, after seeing voters cut his majority.
RESHUFFLE KEY POINTS
No change in top posts of deputy prime minister, home secretary, foreign secretary and chancellor
Patricia Hewitt becomes health secretary
John Reid becomes defence secretary
Geoff Hoon moves to become Commons leader
Peter Hain becomes Northern Ireland secretary
Des Browne enters Cabinet as chief secretary to the Treasury
Newcomer John Hutton becomes chancellor of the Duchy of Lancaster
Alan Johnson takes new post of secretary for productivity, energy and industry
David Blunkett returns to Cabinet as work and pensions secretary
David Miliband takes new post of communities and local government minister as he joins the Cabinet
Mr Blunkett's return comes less than five months after he quit as home secretary after it emerged a visa application for his ex-lover's nanny was fast tracked.
His new job comes as pensions policy is set to become high profile, with a major review due to be published this autumn.
Mr Blunkett will also take charge of controversial plans for reform of invalidity benefit.
The reshuffle also sees Alan Johnson take the new post of secretary for productivity, energy and industry, meaning the Department of Trade and Industry will be renamed.
Mr Blair has also brought three new faces into his Cabinet, with David Miliband, Des Browne and John Hutton joining the top table.
Douglas Alexander will also attend the Cabinet, though not be a member, as the new Europe minister. The job is being given new importance in the run-up to the expected European referendum.
Mr Hutton moves from health to become chancellor of the Duchy of Lancaster, where he will work on reform of public services and the civil service while Mr Browne will be the chancellor's deputy.
Reforming the council tax will be a key part of Mr Miliband's new role as minister for communities and local government.
He will serve in the department of John Prescott.
Downing Street says Mr Prescott's department faces a heavy agenda in the months ahead and so the deputy prime minister will share his workload with the new Cabinet minister.
The line-up of junior ministers will not be announced until Monday.
The shake-up came after Mr Blair became the only Labour leader to win three elections in a row - but with the lowest winning share of the vote recorded.
Mr Blair said he had "listened and learned" after the election result.
The prime minister acknowledged the Iraq war had been "deeply divisive" but he said he believed people wanted to move on.
Labour are expected to see their majority cut from 167 in 2001 to 66. The Tories have 197 seats, up 31, and the Lib Dems 62, up 10 on 2001.
Turnout is up about 2% thanks to big increases in marginal seats.
As the final results arrived in Northern Ireland, Ulster Unionist Leader David Trimble lost his Upper Bann seat to Ian Paisley's Democratic Unionists Party.
Despite his party gaining ground, Conservative leader Michael Howard has announced he will be standing down from the job before the next election.
Tories unseat Labour minister Stephen Twigg
George Galloway wins in Bethnal Green
Independent Richard Taylor wins again in Wyre Forest
Peter Law, who quit Labour in protest at all-women short-lists, overturns a 20,000 Labour majority to win Blaenau Gwent
He will stay as leader until the party's rules on selecting a successor have been changed.
Mr Howard said he would be too old, at 67 or 68, to lead the party at the next election, and would step aside "sooner rather than later".
However, he said the Tories' result had "begun the process of rebuilding our party, of building a broad and outward-looking party that reflects Britain in the 21st Century".
The Conservatives did best in south-east England including unseating schools minister Stephen Twigg, who famously snatched Enfield Southgate from Michael Portillo in 1997.
Turnout up slightly on 2001
Anti-war candidate Reg Keys polls 10% in Sedgefield
Alan Milburn quits frontline politics
Lib Dems win Manchester Withington on 17% swing from Labour
Lib Dems fail to unseat top Tories
BNP gains 5% of vote in seats where they stood
Robert Kilroy-Silk narrowly misses losing his deposit
The Lib Dems won 62 seats, including unseating Labour ex-minister Barbara Roche on a 14% swing.
But they failed in their "decapitation" strategy to unseat ex-Tory chairman Theresa May and shadow home secretary David Davis and Oliver Letwin, who all retained their seats with increased majorities.
Only one member of the Tories' top team - education spokesman Tim Collins - was ousted.
Lib Dem leader Charles Kennedy said voters had ushered in a new era of three-party politics which would produce a very different House of Commons.
"I think that is going to be very healthy, whatever people's political views," he said.
In one of the biggest upsets of the night, George Galloway, of the anti-war Respect party, narrowly beat Labour's Oona King in Bethnal Green, one of the most bitter contests in the 2005 election.