John Hutton will replace David Blunkett as Britain's work and pensions secretary, Downing Street has announced.
Mr Hutton was chancellor of the Duchy of Lancaster and had responsibility for regulation and public service reform.
Mr Blunkett resigned earlier today, for the second time in a year, after breaking government rules in taking a company directorship while briefly out of office.
Mr Hutton will have a heavy workload. Plans to reform welfare benefits, to coax people off state payments and back into work, are due soon, and at the end of November a government report on the future of pensions will be delivered.
Earlier, British prime minister Tony Blair told the Commons David Blunkett was "a decent and honourable man" who had contributed a great deal to his country
Mr Blair said Mr Blunkett had overcome daunting personal challenges and could be proud of his record in British public life.
He said: "I would like to say that whatever mistakes my right honourable friend has made, I have always believed and believe now he is a decent and honourable man."
Mr Blair told MPs that none of the allegations against Mr Blunkett warranted his dismissal under the ministerial code.
British prime minister Tony Blair pays tribute to David Blunkett in the Commons today
He defended his decision not to sack Mr Blunkett over his failure to consult an independent committee about three jobs he took up after leaving Government last December.
Mr Blair said he had investigated the matter and "I could discover no impropriety".
He said there had been "a frenzy" surrounding Mr Blunkett which made it impossible for him to continue.
"He goes, in my view, with no stain of impropriety against him whatsoever," said Mr Blair.
Tory leader Michael Howard said Mr Blair had not only lost a Cabinet ally "but lost his authority".
Mr Blunkett 's resignation was confirmed at 11am after he had two meetings in No 10 with Mr Blair this morning.