Archbishop Pietro Parolin, a 58-year-old Vatican diplomat, is to take over the key post of top foreign policy adviser and deputy to Pope Francis in October. He replaces Cardinal Tarcisio Bertone who has been a controversial and divisive figure in the Vatican corridors of power.
Archbishop Parolin's appointment as Vatican Secretary of State marks the beginning of a major reshuffle among the men who run the Roman Curia.
When a Pope dies or steps down, as happened in the case of former Pope Benedict last February, all Vatican senior clerics automatically lose their jobs.
Pope Francis temporarily reinstated all former department heads, including Cardinal Bertone, while he was planning a radical restructuring of the central government of the Catholic Church.
Now, after nearly six months in office, Pope Francis has set in motion a timetable for Vatican administrative reform.
The retirement of Cardinal Tarcisio Bertone, the appointee of former Pope Benedict seven years ago, and his substitution by a much younger and more experienced Vatican diplomat who is also an accomplished linguist, is just the first stage in an ambitious plan drawn up by Pope Francis to bring the slow-moving papal court into the world of the 21st Century.
Greg Burke, a communications strategist at the Vatican commented: "Archbishop Parolin was the Vatican's deputy foreign minister before he became Ambassador and knows how the Vatican works and how the Catholic Church works around the world. Pope Francis will rely on him heavily for everything regarding international relations."
The Vatican has diplomatic relations with over 170 countries.
The new secretary of state will take over his job in mid October - after Pope Francis has chaired an inaugural meeting on 1 October of a council of eight cardinals from around the world whom he has appointed to advise him on Church policy.
There has been a lack of co-ordination within the various dicasteries or administrative sections which form the Roman Curia or central government of the Roman Catholic Church during the past two decades.
The late Pope John Paul II was in poor health for almost a decade before his death in 2005 and left many decisions to his aides.
His successor Pope Benedict has not been seen as a successful administrator. The "Vatileaks" scandal, when Pope Benedict's butler stole confidential documents detailing cronyism and corruption among top-level Vatican administrators and leaked them to the media, marked a low point in his papacy.
Pope Francis has already set in motion the reform of the Vatican Bank which has allegedly been turning a blind eye to money-laundering by some of its clients. He has also appointed a committee of Catholic economists to advise him on improving accounting methods and financial transparency.
But the appointment of his new secretary of state is by the most important single administrative act carried out by the new Pope since his election last March.