Philip Hammond has been appointed defence secretary following the resignation of Liam Fox.
Hammond's job as transport secretary has been given to Justine Greening, who was economic secretary to the Treasury.
Greening, 42, becomes the fifth woman in David Cameron's cabinet, alongside Theresa May, Caroline Spelman, Cheryl Gillan and Baroness Warsi.
She has been MP for Putney since 2005 and served as a shadow Treasury minister and local government minister in opposition.
Greening, a former auditor and finance manager, has today been promoted from the number four position in the Treasury into the cabinet.
Cameron has promoted whip Chloe Smith to Greening's former role.
Greg Hands takes over from Smith as a whip.
Fox resigned today ahead of the conclusions of an investigation headed by the cabinet secretary into his close friend Adam Werrity.
Werrity, who was best man at Fox's wedding, had accompanied Fox to 18 overseas trips and visited him dozens of times at the ministry of defence, despite having no official role.
It also emerged Werrity was being bankrolled by a number of wealthy private clients who shared his and Fox's pro-American views.
Fox said in a letter to the prime minister:
"I mistakenly allowed the distinction between my personal interest and my government activities to become blurred. The consequences of this have become clearer in recent days. I am very sorry for this."
Cameron responded:
"I understand your reasons for deciding to resign as defence secretary, although I am very sorry to see you go.
"We have worked closely for these last six years, and you have been a key member of my team throughout that time."
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