Mr Murphy takes over from Dr John Reid who is to leave the province to take up the post of chairman of the Labour Party.

The appointment of Charles Clarke as the new education secretary has left a vacancy and Dr Reid, who has been secretary of state for just under two years, has been named as his successor.

Dr Reid said he was disappointed to be leaving Northern Ireland.

John Reid: New chairman of the Labour Party

"I would like to say thank you to all the politicians in Northern Ireland," he said.

"They have given me a few sore heads but I am sure they would say the same about me."

Paul Murphy is no stranger to politics in the province.

As political development minister during Mo Mowlam's time as secretary of state, he served in the Northern Ireland Office from 1997 to 1999.

Ceasefires

Mr Murphy was number two to Mo Mowlam when the Good Friday Agreement was negotiated and is viewed as a safe pair of hands.

He was highly regarded by the parties during his time in the province.

Commenting on the news, Ian Paisley Junior of the DUP said: "I think this is very much a sign that direct rule from Westminster is being firmly bedded in."

Paul Murphy comes back to Northern Ireland with a reputation for being a good listener and we hope he can settle down to his work efficiently

David Trimble UUP leader

Sinn Fein president Gerry Adams said Dr Reid's record was one of "dismal failure".

"He failed to grasp the imperative of the current situation and he suspended the institutions three times," he said.

Ulster Unionist Party leader David Trimble said he hoped Mr Murphy would make a "positive contribution" to the process.

"Paul Murphy comes back to Northern Ireland with a reputation for being a good listener and we hope he can settle down to his work efficiently."

SDLP leader Mark Durkan said Dr Reid had made his own contribution to the Good Friday Agreement.

"As Secretary of State for Northern Ireland he served in eventful times and made his own contribution to the development of the Agreement.

"I do not want to begrudge the contribution he did make but I also am not in denial about some of the differences we had with him including the way the return of direct rule has been handled."

Dr Reid's time at the Northern Ireland Office has been marked by the acts of decommissioning by the IRA.

He was criticised by nationalists for his suggestion Northern Ireland might become a cold house for unionists.

He will also be remembered for declaring the loyalist Ulster Defence Association and Loyalist Volunteer Force ceasefires at an end.

His last significant act in office was the suspension of the institutions earlier this month, the third time he took that step.