Although both sides of the coalition have lost key cabinet ministers since the Government was formed in May 2010, this is the first major planned overhaul of the administration. David Cameron has always made clear his dislike of past traditions for regular reshuffles but will hope the changes can reinvigorate his government.
Ken Clarke and Baroness Warsi have been removed from the Tory front-line in the first major reshuffle of the coalition Government.
Jeremy Hunt is promoted to English Health Secretary after coming under huge pressure as Culture Secretary earlier this year over his role in the BSkyB takeover bid. He is rewarded after a successful Olympics and replaces Andrew Lansley, who becomes Commons leader.
Mr Clarke denied that being moved from UK Justice Secretary to minister without portfolio was a humiliation. The 72-year-old Tory "big beast" told reporters: "Being offered a job in the Cabinet at my age? Don't be so daft. It's rather a privilege, I think."
Lady Warsi had appealed to the Prime Minister to allow her to carry on in the post but used her official @ToryChairman Twitter account this morning to confirm she was "signing off". She is replaced by Grant Shapps, who will attend Cabinet as a minister without portfolio.
UK Transport Secretary Justine Greening was moved to become International Development Secretary and Patrick McLoughlin replaces her.
But London Mayor Boris Johnson hit out at her removal, saying it meant the government was intent on the "simply mad" policy of a new runway at Heathrow, and vowed to fight any such expansion "all the way".
Ms Greening spent well over an hour in Downing Street before the announcement of her job switch. The news drew Mr Johnson's strongest attack yet over Heathrow policy, accusing Mr Cameron of plotting to abandon the Tories' manifesto commitment against a third runway.
Praising Ms Greening as a "first rate transport secretary", he added: "There can be only one reason to move her - and that is to expand Heathrow airport...Now it is clear that the Government wants to ditch its promises and send yet more planes over central London."
The mayor - who has been accused to manoeuvring to replace Mr Cameron as Tory leader - has long called for a new 'Boris Island' airport to be built in the Thames Estuary.
He urged the new Transport Secretary Patrick McLoughlin to "look at all the options, including bolder solutions that would deliver massive benefits in jobs and growth...And it is time for the Government to level with Londoners," Mr Johnson went on. "Are they in favour of a third runway at Heathrow or not?"
Chancellor George Osborne, who was booed last night at the Paralympics, Foreign Secretary William Hague and Home Secretary Theresa May were already considered safe. But senior Number 10 sources confirmed today that Work and Pensions Secretary Iain Duncan Smith and English Education Secretary Michael Gove would also remain in place.
Senior Scottish LibDems Danny Alexander (Chief Secretary to the Treasury) and Michael Moore (Scottish Secretary) also remained in post.
There is a return to the front benches for former LibDem Treasury minister David Laws. The MP, who was forced to resign over his parliamentary expenses just weeks after taking office, is in line to replace Sarah Teather as education minister, according to sources.
East Dunbartonshire MP Jo Swinson, Nick Clegg's PPS and deputy leader of the LibDems in Scotland, becomes a Business Minister, taking reponsibility for Employment Relations, Consumer and Postal Affairs.
Casualties of the changes included Welsh Secretary Cheryl Gillan and UK Environment Secretary Caroline Spelman. Mr Lansley's move from health to Leader of the House will be seen as a demotion.
Baroness Warsi is no longer Conservative Party chairman, but will attend Cabinet with responsibilities for foreign affairs and faith after apparently insisting Mr Cameron give her a more substantial role.
The reshuffle comes after a difficult six months of internal politics for each party set against a backdrop of national economic doom and gloom. Mr Clegg has been forced to concede defeat on reform of the House of Lords, one of his party's most cherished policies, and has been accused of "bumbling".
Mr Cameron has found himself under repeated fire from disgruntled Tory backbenchers over the way he leads the party, including questions over whether he was "man or mouse".
Tory backbencher Peter Bone said the Prime Minister seemed to be "listening to his party" after damaging rebellions over Europe and Lords reforms, and the new team had a more "traditional look".
He said: "The things I wanted to see were the party chairman (Lady Warsi) going and Ken Clarke going. I think Grant Shapps will do very well as party chairman and I think Ken Clarke being relieved of a ministerial department is sensible."
Mr Cameron's shake-up also appeared to have met with the approval of one of his most severe Tory backbench critics, Nadine Dorries. "I'm liking this reshuffle," she wrote on Twitter.
12.45pm The new Cabinet:
David Cameron Prime Minister
Nick Clegg Deputy Prime Minister
William Hague Foreign Secretary
George Osborne Chancellor
Theresa May Home Secretary
Philip Hammond Defence Secretary
Vince Cable Business Secretary
Danny Alexander Chief Secretary to the Treasury
Ian Duncan Smith Work and Pensions Secretary
Andrew Mitchell Chief Whip
Michael Gove English Education Secretary
Jeremy Hunt English Health Secretary
Ed Davey Energy Secretary
Justine Greening International Development Secretary
Maria Miller Culture Secretary
Chris Grayling UK Justice Secretary
Owen Paterson UK Environment Secretary
Michael Moore Scottish Secretary
David Jones Welsh Secretary
Theresa Villiers Northern Ireland Secretary
Eric Pickles Communities Secretary
Francis Maude Cabinet Office Minister
Andrew Lansley Commons Leader
Tom Strathclyde Lords Leader
Dominic Grieve Attorney General
Kenneth Clarke Minister Without Portfolio
Grant Shapps, Conservative Chairman and Minister Without Portfolio
Also able to attend Cabinet: Sayeeda Warsi Foreign Office Minister and Minister for Faith and Communities; Oliver Letwin, PM's policy advisor; David Willetts, Universities and Science Minister
12.30pm Grant Shapps moves from English Housing Minister to Tory Chairman.
12.22pm David Jones has been promoted from Welsh minister to Secretary of State for Wales.
12.18pm Maria Miller has been appointed Culture, Media and Sport Secretary, in place of Jeremy Hunt, and Minister for Women and Equalities.
12.15pm Justine Greening has been appointed International Development Secretary and Patrick McLoughlin replaces her as UK Transport Secretary, Downing Street said.
11.50am Baroness Warsi looks like she has accepted demotion to Minister of State role at Foreign Office but will attend Cabinet with second hat as Minister for Faith and Communities.
11.30am Owen Paterson, who is from a farming background, has moved from Northern Ireland to become UK Environment Secretary. Triumph for the Tory right wing.
11.15am No 10 has confirmed Chris Grayling has replaced Ken Clarke.
11.05am Jeremy Hunt moves from Culture to become English Health Secretary, replacing the controversial Andrew Lansley. Looks like Lansley is becoming Commons Leader, usually post given to someone who is on their way to the departure lounge of government.
10.55am UK Environment Secretary Caroline Spelman set to leave the top table altogether.
10.40am Ken Clarke denied being moved from UK Justice Secretary to Minister without Portfolio was a humiliation. He told reporters: "Being offered a job in the Cabinet at my age - don't be daft."
10.30am No 10 confirms PM has appointed Theresa Villiers as Secretary of State for Northern Ireland. What will the DUP make of that?
10am Suggestion is Chris Grayling, currently Employment Minister at Work and Pensions, likely to become Justice Secretary after Iain Duncan Smith turned down offer to replace Ken Clarke and is staying put at DWP. Other rumours are that Jeremy Hunt at Culture and Justine Greening at Transport will leave their current roles - but not necessarily the Cabinet. Patrick McLoughlin, ex-Chief Whip, said to have got Transport.
9.55am PM spotted going into Commons heading towards his office, which means more bad news for some. Only those senior ministers who are being promoted get to do the Walk of Glory up Downing Street.
9.50am Cabinet, due at 9.45am, not just delayed but postponed for the day. Is the PM having problems?
9.46am Scot Michael Fallon, already deputy Tory chairman, who firefights manfully for the Government, has already been in No 10. Has he been made Chairman as a reward for all those awkward stints on Today and Newsnight?