Mr Donohoe, who is highly regarded by Mr Varadkar, will now, as expected, be in full control of October’s budget.
“Leo highly rates Paschal and the two work very well together. It is a big vote of confidence to be given control of both,” said a source close to Mr Varadkar.
Mayo TD Michael Ring was the other big winner in Leo Varadkar’s Cabinet reshuffle becoming Minister for Rural Affairs.
Mr Ring was spotted in jubilant form around Leinster House from 4pm and made his way towards the Taoiseach’s office in Government Buildings shortly before 6pm to a chorus of well wishers.
Mr Varadkar’s choice of Cabinet had kept Fine Gael hopefuls on edge throughout the day but it was made clear that changes to the ministerial ranks would be modest.
There was some reshuffling of portfolios with Charlie Flanagan becoming Minister for Justice, Tánaiste Frances Fitzgerald moving to the Department of Jobs, and Simon Coveney moving to Foreign Affairs.
A number of other ministers have retained their current posts including Michael Creed who remains on in the Department of Agriculture and Simon Harris who remains in Health.
Proceedings in the Dáil last night were delayed by an hour to allow Mr Varadkar finalise his Cabinet.
Barrister Seamus Woulfe has been appointed Attorney General by Mr Varadkar.
Mr Woulfe has represented Fine Gael in legal proceedings including in a case taken by former junior minister John Perry after he was not put forward by the party in the general election last year. Mr Woulfe replaces outgoing Attorney General Máire Whelan who was appointed to the Court of Appeal.
Upon his election in the Dáil, Mr Varadkar promised his new Government will “not be one of left or right” but of “the new European centre, a Republic where every citizen gets a fair go”.
In his acceptance speech after winning an uncontested Dáil vote to become Taoiseach by 57 votes to 50, with 51 abstentions, Mr Varadkar gave glimpses of his vision while in power.
In a short speech to the House before suspending business until 6.30pm to meet President Michael D Higgins and finalise his new cabinet, Mr Varadkar said he wants to lead a nation for everyone.
Mr Varadkar began by thanking outgoing Taoiseach Enda Kenny for helping with the early stages of his Dáil career, saying “I would not be standing here” if it were not for the support.
Citing Mr Kenny’s “leadership” during the marriage equality referendum in 2015, Mr Varadkar said it “enabled me to become an equal citizen in my own country two years ago” and assume a new position he felt was out of his reach, “at least if I chose to be myself”.
He also said he does not want his Government to be “just about one person”, saying it will also not be a Government of “left and right, it will be one of the new European centre where every citizen gets a fair go”.
Appearing to confirm smaller parties will be given less time to speak in the Dáil — an issue that has provoked much controversy but has been welcomed by Fine Gael backbenchers — Mr Varadkar said while everyone is entitled to their voice it must be “proportionate”.