Peter Mandelson has "immense talent" and will be good for British business, cabinet member Ed Miliband has said.
Mr Miliband, promoted to head of a new energy and climate change department, said even Mr Mandelson's many critics had to agree on his political clout.
Gordon Brown is expected to complete his ministerial reshuffle later, as Mr Mandelson's return grips the news.
Some backbenchers have not welcomed his return, and Clarke issues fresh Brown warning ...
Labour office says unemployment to still fall ... at least one cabinet member is thought to have tried to prevent it.
'Experience'
Mr Mandelson, an EU trade commissioner since 2004, has been appointed as business secretary, replacing John Hutton.
Mr Miliband, former minister for the cabinet office, told BBC News: "Some people like him, some people who don't like him - but even his critics would accept that this is someone of immense talent.
"And, also, someone of even greater experience, now that he's been the EU Trade Commissioner for three years.
"I think British business will be thinking, actually, Peter Mandelson's a good person to be in charge of our interests in government."
Mr Mandelson said he was surprised but "proud" when the announcement was made on Friday.
He twice resigned from cabinet posts under Tony Blair's leadership - once over a loan from ministerial colleague Geoffrey Robinson and once over allegations of misconduct regarding a passport application for the Hinduja brothers.
He was later cleared of any wrongdoing.
John Hutton, replacing Des Browne as defence secretary, said everyone in the Labour Party would welcome Mr Mandelson's return.
But BBC political correspondent Iain Watson said: "Some backbenchers on the left have already denounced his appointment while I understand one cabinet minister tried to block it at the 11th hour".
Left-wing Labour MP John McDonnell said it was "an extraordinary step backwards" and that he was "possibly the most divisive figure in Labour's recent history".
Mr Miliband said the creation of the new Department for Energy and Climate Change was a recognition that the two issues must be considered in tandem.
He told BBC Radio 4: "This new department... reflects the fact that energy policy and climate change policy are inextricably linked, but they've been separate in government.
"With the majority of carbon emissions coming from our use of energy, it's right to bring them together."
The reshuffle could force Conservative leader David Cameron to follow suit with his shadow cabinet to take account of the changes made to the government, including the creation of the new department.
The prime minister defended his decision at a news conference on Friday.
Mr Brown said he wanted to "reinvent government" to cope with the new challenges of financial instability, oil price rises and food price rises.
Pressed on his long feud with Mr Mandelson, said to stem from Mr Mandelson's backing for Mr Blair as Labour leader in the 1990s, he said: "Everybody has got to come together and make sure that as a nation we come through this successfully."
'Masterstroke'
Other key movers in the reshuffle include Geoff Hoon, who has taken over from Ruth Kelly as transport secretary, while Nick Brown returns to the cabinet as chief whip.
Immigration minister Liam Byrne is promoted to the new role of policy co-ordinator, which is not a full cabinet role, but he will attend cabinet meetings.
Margaret Beckett replaces Caroline Flint as housing minister. Ms Flint moves to the Foreign Office as Europe minister.
Leader of the House of Lords, Baroness Ashton, replaces Mr Mandelson in Brussels.
Former home secretary David Blunkett described the appointment as a "masterstroke" and told the BBC it would unite the government.
For the Conservatives, William Hague said it was a "stunning failure of judgement" by Mr Brown: "In bringing back Peter Mandelson - the man who created Labour spin - he has broken his promise to govern in an honest and open way."
Danny Alexander, for the Liberal Democrats, said: "Resurrecting ex-ministers from the political graveyard is not going to breathe new life into Gordon Brown's zombie government."
(BBC)
<< Back