Finance Minister Heng Swee Keat will be promoted to Deputy Prime Minister from May 1, in a move that cements his standing as Singapore's next prime minister.
Meanwhile, both existing Deputy Prime Ministers will relinquish their appointments, the Prime Minister's Office (PMO) announced yesterday.
As part of the ongoing process of leadership transition, Mr Teo Chee Hean, 64, and Mr Tharman Shanmugaratnam, 62, will become Senior Ministers and remain in Cabinet.
All three will continue to carry out many of their current responsibilities. Mr Heng, 57, will stay on as Finance Minister and continue chairing the Future Economy Council and National Research Foundation. He will also be appointed Acting Prime Minister in Prime Minister Lee Hsien Loong's absence.
Mr Teo will continue to be Coordinating Minister for National Security, while Mr Tharman - who is now Coordinating Minister for Economic and Social Policies - will be redesignated as Coordinating Minister for Social Policies. He will still advise the Prime Minister on economic policies, said the PMO.
Yesterday, sovereign wealth fund GIC also announced that Mr Tharman, who is now a GIC director, will be appointed deputy chairman from next Wednesday. He will assist PM Lee, who is GIC chairman, to lead the board in overseeing GIC's long-term asset allocation and portfolio performance, it said. Mr Tharman is also chairman of the Monetary Authority of Singapore.
PM Lee, 67, said the changes are part of the ongoing process of leadership renewal.
"The next-generation leadership is taking shape, and progressively taking over from me and my older colleagues. The team is working closely together, building up public trust and confidence in their leadership," he said in a Facebook post.
"I ask all Singaporeans to support them, and work together to secure a bright future for Singapore." In a separate post, Mr Heng said that he was honoured by PM Lee's trust, and grateful for the older ministers staying on "to share their wisdom". Mr Heng was set to be appointed Deputy PM in this year's Cabinet reshuffle, after he was picked by his peers to be their leader late last year, and appointed first assistant secretary-general of the ruling People's Action Party last November.
Yesterday's changes come a year after a major reshuffle last April, which saw younger ministers taking on heavier responsibilities as 10 out of 16 ministries were helmed by fourth-generation (4G) ministers.
At that time, four backbenchers became office-holders to bolster the front bench, as three veteran ministers retired from Cabinet: Mr Lim Hng Kiang, Mr Lim Swee Say and Dr Yaacob Ibrahim.
Yesterday, Mr Teo said of the reshuffle: "This is the Singapore way of ensuring smooth leadership transition, continuity and stability. Senior leaders make way in good time for the next generation, share their experience and help the next generation of leaders to succeed."
Mr Tharman said: "Swee Keat is the best person to move up to become DPM and take over as PM during the next term of government. He has exceptional ability, mettle and the confidence of the 4G team."
Both DPMs said they hoped to continue serving their residents after the next general election.
Trade and Industry Minister Chan Chun Sing, who Mr Heng had picked last November as his deputy, said: "As one team, we will continue to work closely together to take Singapore forward and to serve all Singaporeans."
The Cabinet has traditionally had two deputy PMs since the 1980s, with the exception of a short period in the 1990s when PM Lee was the only DPM on board.
Observers said the latest move sends a clearer signal - at home and abroad - about the next PM.
"The way I read it, the focus of this reshuffle is on the DPM," said political analyst and former Nominated MP Zulkifli Baharudin. "He will definitely be the person who's going to take over from the PM... It's very clear who the man in charge is."