Crown Prince Mohammed bin Salman, who turned 37 last month, has been first in line to succeed his father as king since 2017.
Saudi Arabia's crown prince, Mohammed bin Salman, has been named prime minister, a post traditionally held by the king.
The heads of other critical ministries, including interior, foreign and energy, remained in place, according to a royal decree from King Salman published on Tuesday by the official Saudi Press Agency.
Prince Mohammed previously served as deputy prime minister under King Salman as well as defence minister.
He is being replaced as defence minister by his younger brother, Khalid bin Salman, who was deputy defence minister.
Prince Mohammed, who turned 37 last month, has been first in line to succeed his father as king since 2017.
Prince Mohammed became defence minister in 2015.
In that role he has overseen Saudi Arabia's military activities in Yemen, where the kingdom leads a coalition backing the internationally recognised government in its fight against Houthi rebels.
He has also become the public face of a reform agenda known as Vision 2030.
Changes have included granting women the right to drive, opening cinemas, welcoming foreign tourists, defanging the religious police and hosting pop stars and high-profile heavyweight fights and other sporting events.