The new company, e-partners, will receive $300m of equity funding from Mr Murdoch's News Corp and Mr Booth will have a significant stake in the venture. Mr Booth was offered the newly-created post to prevent him from leaving the Murdoch empire to take up a top job with Microsoft. His successor, who will be an outside appointment, is due to be announced in the next few weeks.
E-partners will have offices in London and Silicon Valley and will be used as the vehicle for News Corp to take strategic minority stakes in Internet, interactive television and wireless communication ventures.
BSkyB executives denied that the posting was a sideways move or that Mr Murdoch was penalising Mr Booth for the blocking of BSkyB's takeover bid for Manchester United.
Announcing Mr Booth's departure, Mr Murdoch paid him fulsome tribute praising the "outstanding job" he had done at BSkyB since taking up the position 18 months ago. Mr Booth led the launch of BSkyB's digital satellite service, which has already picked up 350,000 subscribers and is on course for one million by this October.
Analysts were relieved that Mr Booth is not being succeeded by Mr Murdoch's daughter, Elizabeth, who is managing director of BSkyB's programming arm, Sky Networks.
"I thought for one moment they were going to put the boss's daughter in charge, which would not have been very well received," said one analyst.
The new company will effectively act as a venture capital fund, providing finance for new media companies. It may also help provide content for BSkyB and BIB, the interactive television service that BSkyB is launching later this year with BT, HSBC Holdings and Matsushita.
News Corp said that e-partners would be separate from its main Internet operating division, News America Digital Publishing. Although Mr Murdoch has been critical of the Internet craze, saying web-based stocks are overvalued and that Internet businesses will destroy more jobs than they create, News Corp has been steadily building a presence in the market.
News Corp has a big equity stake in TV Guide Inc., the leading interactive television channel and magazine, and two prominent websites, FoxNews.com and FoxSports.com. It is also active in the market for broadband services through partnerships with the At Home and Roadrunner cable modem services.
Analysts questioned the effect Mr Booth's move would have on Mr Murdoch's son, James, who looks after the empire's Internet-related businesses. Mr Murdoch said that, in e-partners, News Corp had created a unique entrepreneurial investment structure best able to exploit the opportunities in new media.
Mr Booth's successor will be chosen by a four-man committee made up of Mr Murdoch, the BSkyB chairman, Jerome Seydoux, and two of its non-executive directors Sir Dennis Stevenson and Philip Bowman.
A spokesman said: "This is a plum job and the market is limited so the company has one or two candidates in mind."
Possible successors include David Elstein, the head of Channel Five, who was a former BSkyB executive, and David Chance, who quit BSkyB when its previous chief executive Sam Chisholm left the company.
Mathew Horsman, media analyst with Investec Henderson Crosthwaite, contrasted Mr Booth's departure with that of Mr Chisholm, which had unsettled the BSkyB share price. "It gives him a slew of the equity in a new venture and enables Murdoch to keep Booth working for him, not against him," he said.