Nick Clegg paid tribute to his "good friend and a close colleague" Chris Huhne as he announced Ed Davey will replace him as energy secretary.
"I totally understand and respect why Chris Huhne has stood down," the deputy prime minister said in a statement to journalists on Friday.
"He has been really a pioneer in new and groundbreaking policies," Clegg said, as he made it clear Huhne would be welcomed back in government if he cleared his name.
"I'm pleased that Ed Davey has agreed to take up the post," Clegg added, praising Davey as the "right person" to take up Huhne's mantle.
His words came after Huhne stepped down as energy secretary following being charged with perverting the course of justice. He was formally accused on Friday of getting his now-estranged wife Vicky Pryce to accept points for speeding on his behalf. Pryce faces the same charge and both will appear before Crown Court on the 16th of February. David Cameron said Huhne had taken the "the right decision" in resigning.
It is not clear whether Huhne will accept the severance package of more than £17,000 severance pay he's entitled to.
In welcoming Ed Davey to the cabinet, Clegg said the 46-year-old former business minister had a "lifelong commitment" to green issues. Davey was described by Tricia Bamford, a Lib Dem councillor in his Kingston constituency as a "very safe pair of hands."
Nick Clegg's close adviser Norman Lamb will replace Davey in the Department of Business, Innovation and Skills. Cardiff Central MP Jenny Willott becomes an assistant whip, and Jo Swinson becomes Clegg's PPS.
The promotions maintain the agreed proportion of Conservatives and Liberal Democrats around the Cabinet table fixed in the 2010 coalition negotiations.
David Cameron said Huhne had taken the "the right decision" in resigning. But some Lib Dems will rue the departure of one of their hardest-hitting ministers, who was ready to stand up to Conservatives in Cabinet.
Director of Public Prosecutions Keir Starmer told a news conference on Friday morning: "We have concluded that there is sufficient evidence to bring criminal charges against both Huhne and Pryce for perverting the court of justice." He urged journalists to ensure that both Huhne and Pryce received a fair trial.
Mark Gettleson, Senior Political Analyst at Dods Engagement told Huff Post UK the resignation could damage the party's brand.
"This must be taken in the context of the Westminster bubble, outside of which people will be far more focused on the John Terry story. But at the same time, what is the cumulative effect of the sheer number of high-level personal indiscretions on the wider Liberal Democrat brand?
"As well as their difficulties amid the coalition, resignation amid scandal could become part of the way the party is perceived as a whole - and that would be difficult to overcome."
Friends of the Earth's executive director Andy Atkins said: "Chris Huhne has championed the environment in an administration that's shown little enthusiasm for keeping David Cameron's pledge to be the greenest Government ever.
Chris Huhne was elected to Parliament in 2005 and narrowly lost the Lib Dem leadership contest to Nick Clegg in 2007. He held several frontbench spokesman positions when the Lib Dems were in opposition, including home affairs and Treasury.
When the coalition was formed in 2010 he became energy secretary, but only a month after the election his affair with Carina Trimingham was revealed and he separated from Vicky Pryce three months later.
*More reaction to Huhne's resignation*