William Hague has quit as foreign secretary and will leave the Commons next year as David Cameron wielded the axe to clear the way for a new generation to take places at the Cabinet table.
Former Tory leader Mr Hague will replace Andrew Lansley as Leader of the Commons and lead the Conservative campaign in key constituencies, particularly in northern England, until he gives up his safe seat in Richmond, North Yorkshire.
The Prime Minister said Mr Hague had been one of the Conservative Party's "leading lights" for a generation and had been a "close confidante, wise counsellor and great friend".
The shock announcement follows the widely expected decision by Ken Clarke to retire at 74, ending a career in government stretching back to 1972.
Veteran MP Sir George Young also resigned as chief whip, creating another Cabinet-level position for Mr Cameron to fill.
The vacancy at the Foreign Office will be a plum job for Mr Cameron to allocate, but there are also a number of other spots at the Cabinet table and in the lower ministerial ranks for him to award to rising stars as he refreshes his team before the 2015 general election.
Downing Street said the Prime Minister also accepted the resignations of universities minister David Willetts and energy and climate change minister Greg Barker, who will both stand down as MPs next year.
Andrew Robathan quit as a minister in the Northern Ireland Office, while news of Hugh Robertson's resignation from the Foreign Office filtered through while he was on an overseas trip in Beirut.
In a reshuffle which has been much wider than expected, David Jones was sacked as Welsh Secretary, with reports suggesting his deputy Stephen Crabb was in line for the job.
Dominic Grieve was reported to have lost his job as Attorney General and Owen Paterson was rumoured to be heading to the exit as Environment Secretary despite a rearguard effort by allies to keep him in office.
Nick Hurd said he was leaving his post as minister for civil society and policing minister Damian Green was reported to be leaving his job.
The Prime Minister is expected to take the opportunity to promote fresh faces, including female MPs to his team and the surprise departure of Mr Hague creates an opportunity to appoint someone to one of the Great Offices of State for the first time since 2010, with Defence Secretary Philip Hammond rumoured to be in line for the role.
Senior sources dismissed speculation that Chancellor George Osborne could be moved to the Foreign Office, with government insiders insisting he was focused on the economic recovery.
Mr Hague said: "By the time of the general election next year, I will have served 26 years in the House of Commons and it will be 20 years since I first joined the Cabinet.
"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, in order to focus all my efforts on supporting the Government in Parliament and gaining a Conservative victory in the general election - after four years in which we have transformed Britain's links with emerging economies, significantly expanded our diplomatic network and the promotion of British exports, restored the Foreign Office as a strong institution, and set a course to a reformed European Union and a referendum on our membership of it.
"I am delighted to be able to serve as Leader of the House of Commons and to be able to campaign for Conservative candidates across the country. I want to finish in front-line politics as I began - speaking in Parliament and campaigning among the voters."
Mr Cameron needs to find a senior figure to be the UK's next European Commissioner, but Mr Hague indicated that he wanted to concentrate on his writing career.
"After the general election I will return to my writing, while still giving very active support to the Conservative Party and campaigning on international causes I believe in," he said.
"I wish to thank my constituents in Richmond, Yorkshire, one of the greatest places on earth, for their emphatic support through thick and thin over such a long period. I will serve them with unabated energy between now and the general election, and I look forward to supporting my eventual successor."
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 Clarke used his letter to Mr Cameron to signal his desire to campaign for the UK to remain in the European Union, ahead of the Prime Minister's promised referendum in 2017.
The veteran Europhile said: "We must not diminish Britain's ability to influence events in the next few decades.
"I know that you are quite determined to have a referendum on the subject, in which I will be campaigning vigorously for a vote to keep us in the Union."
The Prime Minister is also expected to promote a host of younger talent, including some of the stars of the 2010 intake.
Those tipped for advancement include employment minister Esther McVey, education minister Liz Truss and ministerial aide Penny Mordaunt.
Other MPs tipped for promotion include Margot James, Amber Rudd and Harriett Baldwin, as the Tory leader seeks to counter criticism that his government is still dominated by men.
Former defence secretary Liam Fox, a darling of the Tory right, could make a comeback to the political front line nearly three years after quitting in a row over his special adviser.
In his letter to Sir George, the Prime Minister thanked him for stepping in as Chief Whip "at a very sensitive time" following Andrew Mitchell's resignation over the Plebgate row.
"You have been the most loyal and dependable of colleagues, a calm and knowledgeable presence at the heart of our Government. I will always appreciate your sage and reliable advice," he said.
To Mr Willetts, the Prime Minister referenced the cerebral politician's nickname:"I have been proud to have 'two brains' at the heart of my team, both in opposition and in government and you, in turn, can take enormous pride in the contribution you have made."
Labour said the reshuffle amounted to a "massacre of the moderates" and highlighted Mr Hammond's Euroscepticism.
Shadow Cabinet Office minister Michael Dugher said: "This speaks volumes about David Cameron's leadership.
"Four years of failure to promote women and now we have the massacre of the moderates.
"Britain's foreign policy is now set to be led by a man who has talked about taking us out of the EU. The Tories are now retreating out of Europe with all the threat that poses to jobs and business in Britain.
"This reshuffle shows how weak David Cameron is, running scared of his own right wing. That's why he cannot focus on the big challenges facing families up and down the country."
Civil rights campaigners Liberty reacted with concern to Mr Hague's move and Mr Clarke's departure.
The organisation's director Shami Chakrabarti said: "Liberty anticipates losing two of the greatest human rights defenders in the current Cabinet. Who in politics will stand up for our fundamental freedoms now?"