European Trade Commissioner Peter Mandelson is to rejoin the Cabinet as Business Secretary.
Mr Mandelson twice resigned from the government, having served as Trade and Industry Secretary and Northern Ireland Secretary.
In order to take up this new role, he will be given a seat in the House of Lords.
The current Business Secretary, John Hutton will replace Des Browne at Defence and Geoff Hoon will replace Ruth Kelly as Transport Secretary.
Mr Mandelson has been the UK’s appointee in Brussels since November 2004 and last year was placed at number three on the PinkNews.co.uk list of the top 50 most important LGBT people in British politics.
In March 2007, amid rumours that Gordon Brown would remove him when he took over as Prime Minister, Mr Mandelson was defiantly telling the BBC: “I don’t know whether this is going to come as a disappointment to him, but he can’t actually fire me.
“So like it or not, I’m afraid he will have to accept me as Commissioner until November 2009.
“But I will not be seeking a nomination for a further term after that time.”
The feud between Gordon Brown and Peter Mandelson is the stuff of Westminster legend.
Mr Mandelson backed Mr Blair over his close friend Mr Brown for the leadership of the Labour party in 1994.
The Prime Minister is said to have nurtured a grudge against Mr Mandelson ever since.
One of the architects of New Labour, Mr Mandelson was one of Tony Blair’s closest advisers and when Labour came to power in 1997, he was rewarded with the job of “co-ordinating the government,” in which he antagonised many more senior figures.
Hated by many in his own party and dubbed the “Prince of Darkness,” he was appointed to the Cabinet twice, but had to resign both times.
He was outed on national television by gay journalist Matthew Parris.