Tamil Nadu Governor K Rosaiah dropped Shanmuganthan from the cabinet "on the recommendation of the Chief Minister," a Raj Bhavan press release said.
Shanmuganathan had recently been relieved as AIADMK's Thoothukudi District Secretary, a key party post.
Jayalalithaa also made portfolio reallocations, handing over the School Education department to Avadi MLA K Pandiarajan, one of the seven dissident DMDK MLAs in the previous Assembly, who joined the AIADMK this year.
School Education Minister P Benjamin is the new Rural Industries Minister.
The swearing-in ceremony of the new Ministers will be held at Raj Bhavan tomorrow evening, the release said.