The departure from the key office of state by one of the Prime Minister's closest colleagues was triggering a much bigger Cabinet reshuffle than first expected; the biggest of Mr Cameron's premiership.
Mr Hague, who is retiring as an MP next May, is to be replaced by Defence Secretary Philip Hammond.
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Mr Cameron's ruthless cull saw the removal of several older, middle-class ministers, with a number of young rising stars expected to replace them when it is completed today.
The Prime Minister will be keen to ensure that the reshuffle will not cause undue political turbulence just two months out from the Scottish independence referendum. Losing the poll would put in the shade any major plans for the Coalition frontline in the run-up to the General Election.
Last month, Mr Hague let slip that he regarded his role as Foreign Secretary would be his last big job in politics but no one expected him to stand down ahead of the 2015 poll. Sources at No 10 made clear the Prime Minister was determined to use Mr Hague's skills to maximum effect in the run-up to the General Election. Consequently, while he will stand down as Foreign Secretary he will become Leader of the House of Commons, helping to co-ordinate Government policy, and also become a leading campaigner in key constituencies.
Mr Hague will also remain as First Secretary of State, a member of the National Security Council, and will be the PM's Special Representative on Preventing Sexual Violence in Conflict.
The Prime Minister said: "William Hague has been one of the leading lights of the Conservative Party for a generation, leading the party and serving in two Cabinets. Not only has he been a first class Foreign Secretary, he has also been a close confidante, a wise counsellor and a great friend.
"He will remain as First Secretary of State and my de facto political deputy in the run-up to the election and it is great to know that he will be a core part of the team working to ensure an outright Conservative victory at the next election."
Mr Hague said: "In government, there is a balance to strike between experience on the one hand and the need for renewal on the other, and I informed the Prime Minister last summer that I would not be a candidate at the next General Election.
"Accordingly, I am stepping aside as Foreign Secretary, to focus all my efforts on supporting the Government in Parliament and gaining a Conser-vative victory in the General Election."
Scots-born Liam Fox could make a comeback nearly three years after quitting in a row over his special adviser. The keeper of the Thatcherite flame has been conspicuously loyal since his fall from grace in 2011.
Earlier, Ken Clarke, 74, who entered Parliament in 1970, brought an end to his ministerial career by resigning as Minister Without Portfolio.
It was also reported that Environ-ment Secretary Owen Paterson has been sacked, in a move that has angered the party's right wing. The arch euro-sceptic presided over the floods chaos that hit southern England earlier this year.
Other departures included David Jones, 62, the Welsh Secretary, Universities Minister David Willetts, International Development Minister Alan Duncan and Minister for Civil Society Nick Hurd. Andrew Robathan quit as a Northern Ireland minister and Damian Green as Policing Minister. Dominic Grieve stepped aside as Attorney General as did
Sir George Young, the 72-year-old Chief Whip, has also stepped down.
Michael Dugher MP, Labour's Shadow Minister for the Cabinet Office, said: "This speaks volumes about David Cameron's leadership. Foreign Office Minister Hugh has also departed.
"Four years of failure to promote women and now we have the massacre of the moderates."