The SNP veteran, who was also reappointed deputy first minister, will leave behind the education brief after a year of scandal around exam results and increasing fears over exams for this year’s cohort of pupils.
Instead Ms Sturgeon, who was re-elected as First Minister by MSPs in Holyrood earlier on Tuesday, has created a new role focused on Covid recovery.
The new Cabinet secretary position will see Mr Swinney take responsibility for government strategy on recovery from the pandemic, as well as working with Michael Gove and other members of devolved administrations on four-nation approaches on policy.
His position will also include responsibility for public service reform and inter-governmental relations.
Appointing Mr Swinney, the First Minister said: “Our first priority as a government is to lead the country through the pandemic and into a recovery that supports our NHS, protects and creates jobs, backs our young people and contributes to our ambition to be a net-zero nation.
“Appointing John Swinney to drive cross government work on Covid recovery is a key step in getting Scotland’s recovery off to the right start.
“How we begin our recovery is crucial to the kind of country we can become and that means ensuring everyone, whether in government, the public sector, the business community or wider society is pulling in the same direction.”
Mr Swinney will also chair a cross-party steering group on Covid-19 recovery, the Scottish Government said, with the first meeting expected to take place next week.
The incorporation of the UN Human Rights treaties into Scots law, which has already caused disagreements with the UK Government, will also fall under his remit.
The deputy first minister said: “Recovery in our schools, our health service, our economy and across our wider society is this government’s immediate priority and I am honoured to have been asked to lead that mission.
“I am determined that government will bring the same urgency that we applied to the actions we took to protect public health, to the actions we need to take to secure a fair and just recovery.
“I will be bringing opposition parties together next week to hear their contributions and to set out how I believe we can all work together to secure a strong recovery.
“As we recover, we must also remember our commitments to improve the lives of people across our society and it is a privilege to continue to lead the work across government to deliver on the incorporation of UN charters and to deliver The Promise for our care experienced young people. “
His removal from the education brief means that one of the most important roles in the Scottish Government is yet to be filled, with further announcements of ministerial appointments expected on Wednesday.
It will be viewed as a victory by some in the opposition who have called for a change of leadership on education.
Mr Swinney said in a thread posted on Twitter: “Over the last five years it has been my privilege to be Scotland’s education secretary. I want to thank everyone involved in education for all that you do to support young people achieve their full potential especially during this difficult last year.
"I am proud that we have a record number of young Scots from deprived backgrounds going to university. By August we will have doubled early learning and childcare and more young people are leaving school to go to positive destinations than when we came to office.
"Progress has been made in closing the attainment gap, we have 3,000 more teachers in our schools and – due to supreme commitment by many – education has been sustained during the immense difficulties caused by Covid.
"There is more to be done to advance Scottish education, but I am proud of the strength and quality of our system. I wish my successor well and will do all I can in my new role as Deputy First Minister and Cabinet secretary for Covid recovery to support those efforts.”
Other high-profile roles such as health secretary and constitution secretary remain vacant in the Cabinet following the decision to retire from frontline politics by Jeane Freeman and Michael Russell respectively.
Speculation around the future of finance secretary Kate Forbes and a potential move into the health brief continues, while former SNP leader in Westminster Angus Robertson will be a likely choice for a Cabinet position, potentially with the constitution brief.
Reacting to Mr Swinney's appointment, Scottish Labour deputy leader Jackie Baillie said: “It is right that John Swinney has been moved on from his previous role.
“He has left a wake of damaging failures behind him that require urgent action to fix.
“Putting him in charge of our recovery is potentially gambling with the health and well-being of the nation. While we wish him well, he must demonstrate quickly that he is up to the job.”