Mr Baker, in an emotional farewell address, told State Department staff that agreeing to leave had been 'the most difficult decision of my life'. He will replace the current Chief of Staff, Samuel Skinner, on 23 August, directly after next week's Republican Party convention in Houston.
Stepping in as acting Secretary of State at least until the November election will be Mr Baker's current deputy, Lawrence Eagleburger, a long-serving and widely respected diplomat who has considerable experience both in the Middle East and in former Yugoslavia.
Mr Skinner, who took over from John Sununu as Chief of Staff only nine months ago, moves down and sideways to be 'general chairman' of the Republican National Committee.
Mr Bush's troubles were highlighted by a fresh ABC-Washington Post poll yesterday showing the Democrat nominee, Bill Clinton, still maintaining a huge lead over the President, in spite of a tirade of Republican attacks against him in recent days. The poll gave him 60 per cent against 34 per cent for Mr Bush. The gap between them was slighter narrower in a second poll for CNN, giving Mr Clinton and Mr Bush 56 per cent and 37 per cent respectively
In an expression of confidence, Mr Clinton admitted that his campaign staff have begun studying the likely make-up of a Clinton administration. 'I owe it to the American people to be ready,' he said in an interview with USA Today, adding that he would favour having both Democrats and Republicans in his cabinet.
In a brief press statement at the White House, Mr Bush applauded Mr Baker's achievements as Secretary of State since 1989, a period that saw the collapse of the Soviet empire, the unification of Germany and the quelling of war in Central America. 'He's the sort of man you want on your team,' the President concluded.
From his new position, Mr Baker is expected to take virtually full command of the Bush-Quayle campaign and White House operations until the November election. A feared political strategist, Mr Baker responded to a similar cry for help from Mr Bush mid- way through the 1988 race with Michael Dukakis, abandoning his post as Treasury Secretary to become campaign chief.
The White House will attempt to emphasise Mr Baker's recent role in bringing change to the rest of the world and present him as the man best able to help Mr Bush to engineer change in America - a winning election theme hitherto commandeered by Mr Clinton. 'He knows about change,' Mr Bush said. 'He will help me build on what we have started by developing an integrated second-term programme of domestic, economic and foreign policies.'
Mr Bush came under swift attack from the Democrats, who accused him of acting out of desperation and sacrificing the country's foreign policy concerns to escape humiliation. 'Bush and Quayle are in a state of political panic,' remarked Mr Clinton's running mate, Al Gore. 'They're throwing everything, including the kitchen sink, into their political quest.'
Mr Clinton last night attacked the administration's foreign policy, arguing that Mr Bush had failed to recognise the changed world situation since the end of the Cold War or to determine what course the US should take. 'I do not believe he has a complete vision of this new era,' he asserted in his first big foreign policy speech since his nomination, addressed to the World Affairs Council in Los Angeles.
Mr Baker will be taking with him to the White House most members of his powerful inner circle of advisers. They include his spokeswoman, Margaret Tutweiler and Under-Secretary, Robert Zoellick. So complete a decampment from the State Department has served only to heighten fears that US foreign policy will be left in limbo at a time of high stakes both in the Balkans and in the Middle East.
The Middle East peace talks are to resume on 24 August in Washington - the day after Mr Baker switches jobs. Administration officials indicated, however, that even from the White House, Mr Baker will still direct the peace talks together with his leading aide, Dennis Ross. A success in achieving peace in the Middle East before November could itself be an all-important election boost for the President.
After weeks of frustration with the apparent ineffectiveness of Mr Skinner, Republican campaign members will be heartily relieved that Mr Baker's transfer has at last been confirmed, after weeks of speculation and rumour. Some Republicans remained cautious, however. Senator Bob Dole remarked: 'I'm not certain one person can change everything. I'll be frank: we need help. Jim Baker's help would certainly be useful.'