Keir Starmer moved to shore up his top team after his embattled chief of staff Sue Gray quit following months of sniping and criticism that she acknowledged had undermined the new Labour government.

Gray resigned less than a week before the Labour government was due to mark its first 100 days in office, after becoming embroiled in a political storm at the heart of Downing Street.

Gray will be replaced by Morgan McSweeney, who masterminded Labour’s election victory, and with whom she is said to have found herself at odds in government.

While a number of senior Labour figures had downplayed the friction between Gray and McSweeney, both of whom are close to the prime minister, one cabinet minister had foreshadowed Gray’s future weeks ago, telling the Guardian: “One or both of them will have to go. It’s not going to be Morgan.”

The top civil servant had been the subject of fierce and relentless briefings which started less than a month after Labour entered office.

She had been accused of micromanaging personnel and limiting access to the prime minister’s official red box of government papers so she became “extraordinarily powerful”.

Gray had also been blamed by some insiders for a failure to avoid and control the controversy over freebies, with some claiming she lacked “political experience”, even though she was credited for knowing exactly how the civil service worked.

Some insiders have expressed disappointment that the leakers who briefed against Gray had “won” the battle inside No 10, with McSweeney replacing her as chief of staff.

A number of cabinet ministers had defended her, saying the “appalling” briefings must stop or risk undermining the government, however colleagues had still accused her of creating a “bottleneck” within No 10 that had delayed policy decisions and appointments.

Gray, a former senior civil servant who led the official report into the Partygate scandal, will now embark on a new role as the prime minister’s envoy to the nations and regions.

The Guardian understands that Gray is expected to receive a peerage with her new role. It is not yet clear whether the envoy position will be paid or not.

Gray acknowledged in a statement on Sunday how “intense commentary around my position risked becoming a distraction”.

In her resignation statement, she said: “It has been an honour to take on the role of chief of staff, and to play my part in the delivery of a Labour government. Throughout my career my first interest has always been public service.

“However, in recent weeks it has become clear to me that intense commentary around my position risked becoming a distraction to the government’s vital work of change. It is for that reason I have chosen to stand aside, and I look forward to continuing to support the prime minister in my new role.”

At the same time as announcing Gray’s departure and that McSweeney would be taking over as chief of staff, Starmer also sought to bolster his wider No 10 operation, to get it on a more steady footing after a rocky few months.

In a written statement, Starmer said: “I’m really pleased to be able to bring in such talented and experienced individuals into my team. This shows my absolute determination to deliver the change the country voted for.”

The depth of concern internally around Gray’s position, had at times overshadowed what should have been significant moments for the new prime minister.

On a trip to the US, Starmer was forced to insist that he was “completely in control”, after it emerged that Gray was paid £3,000 more than he was.

There was a furious backlash among Labour special advisers who felt that Gray had held down their pay. Many joined a union over their concerns.

One government insider said the briefings would have “wounded” the prime minister who was “laser-focused on delivering”, and understood to be exasperated that the briefing was “undermining” the whole government.

Starmer, who has previously shut down talk of there being a “boys club” in the Labour party, used this reshuffle to promote more women into his team.

The political director at No 10, Vidhya Alakeson, and the director of government relations, Jill Cuthbertson, have been promoted to deputy chiefs of staff, while the former journalist James Lyons will join to head up a new strategic communications team.

On the civil service side, Nin Pandit, a former director of the Downing Street policy unit, has been appointed principal private secretary to the prime minister. A new cabinet secretary is yet to be appointed following confirmation that Simon Case is stepping down.

As the briefings persisted, a number of senior Labour figures had downplayed the friction between Gray and McSweeney.

A Conservative party spokesperson has described Downing Street as being in “chaos”. In a statement, they said: “In fewer than 100 days Sir Keir Starmer’s Labour government has been thrown into chaos – he has lost his chief of staff who has been at the centre of the scandal the Labour party has been engulfed by.

“Sue Gray was brought in to deliver a programme for government and all we’ve seen in that time is a government of self-service. The only question that remains is: who will run the country now?”