Jack Straw's fate was sealed in a phone call from the White House to Tony Blair last month, according to the former foreign secretary's friends.
They say President George Bush was furious that Mr Straw said it was "nuts" to use nuclear weapons against Iran, an option reported to be under active consideration in Washington.
Downing Street had already warned Mr Straw repeatedly to tone down his complete rejection of the military route as "inconceivable", insisting it was important to keep all options on the table.
The division between Mr Straw on the one hand and Mr Bush and Mr Blair on the other was exposed in Prime Minister's Questions on 19 April, although few realised the significance of the exchanges.
Sir Menzies Campbell asked Mr Blair whether he agreed with his Foreign Secretary that military action against Iran would be "inconceivable" and that the use of nuclear weapons would be "nuts".
An uncomfortable-looking PM said that while "nobody is talking about a military invasion" now was "not the time to send a message of weakness. The President of the US is not going to take any option off the table. That is perfectly sensible for all the reasons the President has himself given many, many times".
There is said to be jubilation this weekend among Washington's neo-conservatives at Mr Straw's demise. One retired senior US intelligence officer told his British counterpart recently that the White House lost confidence in the Foreign Secretary at least six months ago.
It was an analysis, we now know, shared by Mr Blair. The PM's aides say Mr Straw has a tendency to brief friendly journalists with the details of a contentious meeting, sometimes within hours.
Mr Blair was once moved to rebuke Mr Straw in a cabinet meeting for briefing to The Sunday Times his preference for a referendum on the EU constitution, boxing the PM into an option he was then resisting.
When at last the constitution finally hit the buffers Mr Straw called Mr Blair as he holidayed in Tuscany with the news. A report at the time stated: "Mr Blair had to calm the Foreign Secretary and urge him to contain his delight at the constitution's demise. When he put the phone down, the Prime Minister simply said: 'Tart'." While Mr Straw can claim to have been loyal in the build-up to the invasion of Iraq, his behaviour since has occasionally teetered on the edge of unacceptability.
Downing Street figures note that leaks of Foreign Office papers on Iraq almost always show Mr Straw as a moderating influence over Blair and Bush.
Then there was his "grandstanding" with Condoleezza Rice, US Secretary of State. Her visit to Blackburn prompted a mixture of contempt and irritation among Blairites as Mr Straw milked it for every possible media advantage.
But it was the looming crisis in Iran that is being blamed by Mr Straw's friends for his demise. Mr Blair is said to regard the country's nuclear ambitions as the greatest threat to the world and had grown weary of Mr Straw's efforts to block any possibility of a military strike. Margaret Beckett, his successor, can expect to be asked whether she too regards it as "inconceivable" that force could be used against Tehran at the first opportunity. The new Foreign Secretary flies to New York tomorrow to meet Ms Rice and discuss a new UN Security Council resolution on Iran.
Mr Straw's decision to accept his demotion is double-edged for Mr Blair. While he has humbled an enemy, he has not killed him and left him in a post that is more powerful than it looks. As Leader of the House, Mr Straw can build support for his ally Gordon Brown among backbenchers.
Mr Straw now controls the legislative programme, so Mr Blair might find he needs the man he demoted more than he would like as he struggles to ram controversial laws through the Commons.
"Jack will bide his time, nursing his wounds and waiting for his moment of revenge," said a former cabinet colleague last night.
UP: THE WINNERS
John Reid HOME SECRETARY
Good move: Blairite thug to sort out weak bureaucracy
Bad move: Could be a bridge too far for overworked Mr Fixit
Alan Johnson EDUCATION SECRETARY
Good move: Will soothe raw Labour wounds over Tory-backed Bill
Bad move: As Gordon sees it, builds up possible challenger
David Miliband ENVIRONMENT SECRETARY
Good move: Young star to face challenge from green Cameron
Bad move: Neither Blair nor Brown will let him be green
Hazel Blears LABOUR PARTY CHAIR
Good move: We can understand what she is saying
Bad move: We don't like it
Margaret Beckett FOREIGN SECRETARY
Good move: First woman to hold this great office of state
Bad move: Will not stand up to Blair
Douglas Alexander TRANSPORT SECRETARY
Good move: Trainspotterish attention to detail
Bad move: Lacks the human touch
DOWN: THE LOSERS
John Prescott DEPUTY PM, STRIPPED OF DEPARTMENT
Good move: Sexual embarrassments provide excuse
Bad move: He keeps his grace-and-favour houses
Ruth Kelly LOCAL GOVERNMENT SECRETARY
Good move: Never quite convinced at Education
Bad move: View of gay rights jars with equalities brief
Jack Straw LEADER OF THE COMMONS
Good move: Puts an end to the Jack and Condi Show
Bad move: The White House wanted him out
Geoff Hoon MINISTER FOR EUROPE
Good move: Demotion for Iraq war defence secretary
Bad move: Definitely now a Brown supporterReuse content