Mr Milne, who had been chairman and chief executive chairman of the group, has been succeeded as chief executive by managing director Glenn Allison.
Mr Allison has already been performing much of the top role for some time.
The switch will see Mr Milne, now executive chairman, retain overall leadership, but focus more on long-term strategy for the business.
He said the move was designed to help the group maximise opportunities as the economic recovery picks up.
Mr Milne said: "To a certain extent it's the way we have been operating for the last two years.
"The economy has started to move forward over the last 12 months or so, and we have clear plans now in place for considerable growth for the next five years or so.
"We believe it's the right time really to split the two roles. I think they are two very distinct jobs. My role will be executive chairman.
"It will provide me with the opportunity to step back a wee bit and take a wider perspective on group performance, making sure we are lining up the opportunities that are going to underpin the group's growth over the next three to five years."
The changes come as Stewart Milne Group prepares to enter a significant growth phase.
The firm is reporting a 40 per cent increase in orders for its timber frame systems and scheduled to deliver 5,000 new homes in Scotland and the north-west of England in the next three to five years.
It opened its first office in Edinburgh in April to spearhead its move into central and east Scotland, building on recent projects in Bonnyrigg, Prestonpans and Gorebridge.
Outside Scotland, group's housebuilding division in Manchester is poised to "grow considerably" in the next five years, while its timber frame operation in Oxford is beginning to "drive forward at pace".
Mr Milne declined to state a position on the forthcoming independence referendum, but said the group had not detected any impact from the debate on the Scottish housebuilding market.
He credited the Help to Buy scheme with helping the housebuilding market return to health in Scotland, and said the industry was appealing to ministers for further funding to expand it.
Mr Milne said: "It's been a great aid to the housebuilding industry throughout the UK.
"South of the Border there has been considerably more money available and a longer-term commitment to continue to fund it.
"Unfortunately in Scotland we haven't achieved that level in terms of the money that has been available. But it's been a great aid to kick-start the housebuilding sector."
Mr Allison, who has been with the Stewart Milne Group for 25 years, said: "This is a particularly exciting period for the group and I am pleased and proud to play a more focused and strategic role in delivering our long-term plans, working alongside Stewart and the managing directors of our divisions."