Sue Gray has resigned from her position as Downing Street Chief of Staff.
The former civil servant has been the Prime Minister's top aide in No10 since Labour's landslide general election victory in July.
Downing Street has confirmed that she will take on a new Government role as "envoy for regions and nations."
Prime Minister Sir Keir Starmer thanked her for her work saying she will play "a vital role in strengthening our relations with the regions and nations."
In a written statement, Sir Keir said: "I want to thank Sue for all the support she has given me, both in opposition and government, and her work to prepare us for government and get us started on our programme of change.
"Sue has played a vital role in strengthening our relations with the regions and nations. I am delighted that she will continue to support that work."
In the statement, Gray said: "I am pleased to have accepted a new role as the Prime Minister’s envoy for the regions and nations.
"After leading the Labour party’s preparation for government and kickstarting work on our programme for change, I am looking forward to drawing on my experience to support the Prime Minister and the Cabinet to help deliver the government’s objectives across the nations and regions of the UK.
"In addition to building a close partnership with devolved governments, I am delighted this new role will mean continuing to work alongside and support the Prime Minister, Deputy Prime Minister, the Cabinet and the Mayors on English devolution."
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She added: "It has been an honour to take on the role of Chief of Staff, and to play my part in the delivery of a Labour government. Throughout my career my first interest has always been public service.
"However in recent weeks it has become clear to me that intense commentary around my position risked becoming a distraction to the government’s vital work of change. It is for that reason I have chosen to stand aside, and I look forward to continuing to support the Prime Minister in my new role."
Sir Keir's chief adviser and former Labour general election campaign director Morgan McSweeney will replace Sue Gray as Downing Street Chief of Staff. Nin Pandit, director of the Downing Street Policy Unit, has been appointed Parliamentary Private Secretary to the PM.
Downing Street said former deputy political editor at the Daily Mirror James Lyons will join to head up a new strategic communications team.
A Conservative Party spokesperson has described Downing Street as being in "chaos."
They said in a statement: "In fewer than 100 days Sir Keir Starmer’s Labour Government has been thrown into chaos – he has lost his chief of staff who has been at the centre of the scandal the Labour Party has been engulfed by.
"Sue Gray was brought into deliver a programme for government and all we’ve seen in that time is a government of self-service. The only question that remains is: who will run the country now?"
Meanwhile, Sue Gray’s departure is the result of “vicious Labour infighting”, a Conservative Party leadership hopeful has claimed.
Newark MP Robert Jenrick said: "Fewer than 100 days in and this Labour Government is in complete disarray. (Sir Keir) Starmer is without a national security adviser, private secretary and the most senior civil servant has sped up his exit.
"Now, his handpicked chief of staff has been forced out by vicious Labour infighting. This Government is in free fall."
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