The other is Igor Shuvalov, who was Putin's top economic policy aide at the Kremlin.
Among the few major changes were the removal of Leonid Reiman, the telecommunications minister, the splitting of the industries and energy ministry into two separate entities, and the creation of a new ministry for sport and tourism and another for ecology.
Sergei Sobyanin, who headed the Kremlin administration under Putin's presidency, moves with his former boss to become government chief of staff.
He will be replaced by Sergei Naryshkin, who previously served as a deputy prime minister and head of a state shipbuilding conglomerate.
Medvedev also moved Nikolai Patrushev from his post heading the FSB, Russia's main domestic spy service, and sent him to run the country's Security Council.
Patrushev's successor at the FSB will be Alexander Bortnikov, previously FSB deputy director.
Igor Sechin, Putin's deputy chief of staff at the Kremlin and seen as one of Russia's most powerful figures, will become one of five men with the rank of deputy prime minister, along with Sergei Ivanov, a close Putin ally and former KGB spy.
Sechin is also head of the oil giant Rosneft and was widely seen as a hardliner in Putin's entourage and one of the architects of the controversial legal assault against Yukos oil company.
State television showed Putin proposing the names to Medvedev at a brief meeting earlier in the day.
"As we agreed, the necessary documents concerning the structure of the government and the personal appointments of the deputies of the prime minister and federal ministers are ready," Putin said.
Medvedev replied that he would approve all necessary decisions because the two men had been working on the government structure together for the past two months.
Under Russia's constitution, the prime minister proposes cabinet names to the president, who must approve them before they are final.