Federal Emergency Management Agency director Michael Brown was recalled to Washington on Friday and replaced at ground zero by Vice Admiral Thad Allen from the US Coast Guard, Homeland Security Secretary Michael Chertoff said.
Brown had resisted calls to resign over the sluggish federal response to the disaster in which hundreds are feared to have died and billions of dollars' worth of damage sustained to property and infrastructure.
"I have directed Mike Brown to return to administering FEMA nationally," Chertoff told journalists in state capital Baton Rouge.
"Mike Brown has done everything he possibly could to coordinate the response to this unprecedented challenge. I appreciate his work as does everybody here," he added.
Under-fire President George Bush had notably stood up for Brown in the immediate aftermath of the hurricane, which struck the Gulf Coast more than a week ago, telling him "Brownie, you're doing a heck of a job".
Chertoff said that Brown would continue to support Allen in the recovery and reconstruction stage and defended the disaster agency chief's performance.
"Hurricane Katrina will go down as the largest natural disaster in American history and Mike has done everything he possibly could to coordinate the federal response to this unprecedented challenge," he said.
Media reports on Friday alleged that Brown's White House resume seemed to have been padded and that he lacked the necessary expertise for dealing with disaster operations.
Lack of experience
Time magazine said Brown lacked emergency relief experience before he joined the agency as a Bush appointee in 2001 and that there were discrepancies in his official FEMA resume and a White House press release from 2001.
The Washington Post went further, saying that five of eight top FEMA officials - all with ties to Bush's 2000 campaign - had virtually no experience in handling disasters.
"At last President Bush has recognised what I have been saying for more than a week: The federal response to this disaster must be managed by a capable leader"
Bush himself has faced outspoken criticism over his perceived lack of leadership over the crisis and the Democrats, while largely refraining from seeking to make political capital, have exploited chinks in Bush's armour.
Democrat Congresswoman Nancy Pelosi welcomed the decision to give Brown a back seat and saw it as an admission that the federal response to the disaster had been inadequate.
"At last President Bush has recognised what I have been saying for more than a week: The federal response to this disaster must be managed by a capable leader," she said in a statement.
"Admiral Allen is an emergency response professional, which has been lacking from federal management of this crisis. Admiral Allen has a difficult job ahead, but at least he brings to it years of experience," Pelosi added.
Democrat Senator Charles Schumer echoed her comments, saying: "Michael Brown is a nice man, but was clearly not up to this crucial and important job. The White House was absolutely correct in replacing him."
Chertoff warned that much remained to be done in the recovery operation.
"We have here on the ground some enormous challenges in Louisiana and in Mississippi," notably health concerns connected with festering bodies, gasoline, chemicals and other contaminants in the water.
"We must have seamless interaction with military forces as we move forward with our critical work in New Orleans and the surrounding parishes," he added.