Defence Minister Prince Mohammed bin Salman, in his 30s, was named deputy crown prince thanks to his "massive capabilities which became evident to everyone through all the missions he had been assigned with," said a statement by his father, King Salman, 79.
Just weeks after taking charge of the kingdom's armed forces Prince Mohammed assumed huge responsibility when a Saudi-led coalition on March 26 began an air war against Iran-backed rebels in Yemen.
His nomination on Wednesday gained "support from the vast majority of members of the Council of Allegiance," a committee of 35 descendants of the kingdom's founder Abdul Aziz bin Saud.
The council was formed in 2006 to decide on succession.
Prince Mohammed also retains his position as head of the economic and development council, a coordinating body, and was named as second deputy prime minister.
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But he will no longer hold the crucial position of head of the royal court, a type of gatekeeper to the king.
"He is the strong man in Saudi Arabia," a Western diplomatic source said before the reshuffle. "He oversees everything important which is going on in this country."
The exact age of Mohammed, who sports a full dark beard, is uncertain. Analysts and local media have reported various ages but none higher than 35.
According to a biography from the MiSK Foundation, which Prince Mohammed established for youth development, he had "a professional career of 10 years" and was active in business and philanthropy before entering public service.
In 2009 he became special adviser to his father who was then the governor of Riyadh, before heading his court from 2013 after Salman was named crown prince.
In April last year Prince Mohammed became a state minister and cabinet member, prior to his appointment as defence minister and chief of the royal court on January 23, the day Salman became king upon the death of his predecessor Abdullah at the age of about 90.