Cazeneuve, who has overseen the security forces' reaction to a string of jihadist attacks that have killed more than 230 people in France over the past two years, will take control of the Socialist government until the election in May.
The widely-respected former lawyer was named to the post after President Francois Hollande accepted Valls's resignation early today.
Cazeneuve, 53, has served in various government roles, including budget minister and minister in charge of European affairs, before becoming interior minister in April 2014.
The mini-reshuffle comes after Valls, who has been prime minister for the past two-and-a-half years, said yesterday he would step down to contest a leftwing primary in January.
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The 54-year-old quit the government to devote himself to the presidential race, in which polls currently show him trailing in fifth place overall.
Announcing his candidacy yesterday, he vowed to take on the conservative Republicans and the far-right National Front led by Marine Le Pen.
His announcement came four days after Hollande said he would bow out after a single term, paving the way for his divisive premier to try to become the left's new standard bearer.
The far right, which was beaten in Austria's presidential election at the weekend, was "at the gates of power" in France with a nationalist programme that would "ruin" the poor, he warned.
Polls show Le Pen and conservative candidate Francois Fillon far out in front in the opening round of the election on April 23, with Fillon expected to beat Le Pen in May's second round.
Valls would crash out with 10 percent if he won the nomination - behind Fillon, Le Pen, centrist former economy minister Emmanuel Macron and the Communist-backed Jean-Luc Melenchon, an Ifop-Fiducial poll showed today.
"We're told that Francois Fillon is the next president of the Republic. Nothing is set in stone," he said defiantly.
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