Three months after taking power, King Salman named his nephew Mohammed bin Nayef, 55, as the crown prince in place of his own half-brother Prince Moqren bin Abdul Aziz bin Saud, 69.
He also put his thirty-something son Mohammed bin Salman second in line to the throne by naming him deputy crown prince.
"King Salman wants to renew the state structure by injecting new blood," said Saudi political analyst Khaled Batarfi, noting a drop in the average age of leaders to their mid-50s.
This includes new top diplomat Adel al-Jubeir, who is taking over from Prince Saud al-Faisal, the world's longest-serving foreign minister whose health has deteriorated at the age of 75.
At 53, Jubeir has been Riyadh's ambassador to Washington for eight years.
King Salman is 79 and his predecessor, Abdullah, died aged around 90.
"The idea is that the future needs to be clear to those inside and outside the kingdom," said Batarfi. "Now, the future is clear and we know who will be at the helm" to lead a predominantly young population.
Stability in the OPEC heavyweight is watched globally because of the impact the world's largest exporter of crude has on oil markets.
"This is a proof that the country has a young cadre," said analyst Khaled al-Maeena, describing the move to shake up the line of succession as "rejuvenating".
He said the new-look line-up needed to "lead from the front".
"The world has changed... This is a new generation faced with new challenges that needs new blood and skills," he said.
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- 'Break from tradition' -
Saudi Arabia has forecast a budget deficit of $39 billion this year due to the collapse of oil prices, after enjoying several years of consecutive windfalls.
Despite its large reserves of $714 billion, the Sunni-ruled kingdom faces the unexpected cost of its military campaign against Shiite rebels in Yemen, which began in late March.
Politically, the air war dubbed "Decisive Storm" has helped to promote the two princes, according to Anwar Eshki, the head of the Jeddah-based Middle East Centre for Strategic and Legal Studies.
"Saudi Arabia lives now in the post-Decisive Storm era... Those who ran this operation became prominent and a change was needed accordingly," he said.
As defence minister, Mohammed bin Salman has led the operations against the rebels in Yemen, while Interior Minister Mohammed bin Nayef has been the kingdom's key figure in combating jihadists.
But bringing his nephew and his son so close to the throne also reflects King Salman's bid to tighten the grip on power by his side of the royal family, departing from the usual practice of power-sharing within the family.
"This is a real break away from the traditions of Saudi politics," said Stephane Lacroix, Saudi Arabia specialist at Sciences PO in Paris.
"Power has usually been shared within the family, while the king would rule in a consensual manner," he said.
King Salman and six full brothers had formed the powerful "Sudayri Seven" bloc, named after their mother Hassa al-Sudayri. In total, King Abdul Aziz bin Saud, the founder of the kingdom, had 35 sons.
On Twitter, self-proclaimed whistleblower Mujtahidd wrote on Sunday that Moqren, whose mother is Yemeni and who has no full brothers, was facing strong pressure to step down as a crown prince, "instead of being forced out by a royal decree".
A decree on Wednesday said Moqren was being removed from his post at his own request.