Google co-founder Larry Page is to take over as the company's chief executive from Eric Schmidt, at a time when competition from fast-growing rivals like Facebook is increasing.
Mr Page's assumption of control of the company's day-to-day operations marks a return to Google's technological roots, 13 years after he and fellow Stanford University student Sergey Brin founded what has become the world's biggest internet search engine. Today, the company's annual revenue stands at 19bn.
The news of Mr Page's appointment came as Google reported earnings and revenue that beat expectations.
While Google has dominated internet search for a decade, the company has struggled to find its footing in social networking, with a new crop of companies such as Facebook and Twitter gaining Web traffic and attracting engineering talent.
Mr Schmidt, who will step aside on April 4 and make way for Mr Page, said in an interview that the change was "not a reaction to competitors".
It was an effort to speed up decision-making at the company, he said, which ended the year with about 24,000 employees.
"Google has many different businesses and the issue that we have been getting into is there's too many ways (in) which these businesses can be slowed down," Mr Schmidt said.
Mr Schmidt, who became CEO in 2001 to bring more management experience to a then-fledgling company, will assume the role of executive chairman, focusing on deals and government outreach, among other activities. Mr Brin will concentrate on strategic projects.
"The Street will think it's a negative, that there is probably some issue going on. Google is trying to get more efficient and trying to get a tech guy in the seat to compete with Facebook," said UBS analyst Brian Pitz. "I don't think it changes anything strategically where the company is headed."
News of the change came as Google reported a 29 per cent surge in both net profit and net revenue that beat forecasts. Net income, excluding items, of $8.75 a share outstripped Wall Street's average forecast of $8.10.
The world's top internet company is recruiting and going on an acquisitions spree, aiming to ensure its online products remain popular as internet users turn to new services like Facebook and wireless gadgets.
Google is also facing increasing regulatory scrutiny as its influence on the internet grows and the company expands into other markets.