Max Verstappen will form a new driver line-up for Red Bull alongside Daniel Ricciardo, replacing Daniil Kvyat from the Spanish Grand Prix onwards.
Kvyat - who has been dropped following his crashes at the Russian Grand Prix - will now race for Red Bull's junior team Toro Rosso in Barcelona on the weekend of May 13 to 15. The 22-year-old drove for the Italian-based team in 2014.
Verstappen, 18, who made his debut last year as the sport's youngest-ever driver, makes the move up from Toro Rosso following Kvyat's poor display at his home race.
Kvyat twice crashed into Ferrari's Sebastian Vettel on the opening lap, leaving the four-time world champion in the wall and livid.
Red Bull Racing team principal Christian Horner said: "Max has proven to be an outstanding young talent. His performance at Toro Rosso has been impressive so far and we are pleased to give him the opportunity to drive for Red Bull Racing.
"We are in the unique position to have all four drivers across Red Bull Racing and Toro Rosso under long-term contracts with Red Bull, so we have the flexibility to move them between the two teams.
"Dany will be able to continue his development at Toro Rosso, in a team that he is familiar with, giving him the chance to regain his form and show his potential."
Toro Rosso counterpart Franz Tost said: "We are more than happy to welcome Daniil back to Faenza and look forward to having a successful season with him."
With Verstappen already being tipped by seasoned observers as a future world champion after starring in his debut season, the pressure on Kvyat to deliver more consistent performances was already growing even before 2016 began - despite the Russian outscoring highly-rated team-mate Daniel Ricciardo at Red Bull in 2015.
Kvyat claimed the second podium finish of his career at last month's Chinese GP but the team's management were left unimpressed with his driving on the opening lap in Russia, when he twice hit Vettel and knocked the Ferrari into Ricciardo.
Both Red Bulls were damaged and failed to score points, meaning the team lost touch with Ferrari in the Constructors' Championship and saw their advantage over Williams all-but wiped out.
Reacting to the news Kvyat had now been demoted, McLaren's Jenson Button tweeted: "Really? One bad race and Kyvat's dropped, what about the podium in the previous race? #Shortmemories. I respect his [Verstappen's] talent but he's got time on his hands."
Verstappen is thought to be tied to Red Bull until the end of 2017 but it is an open secret Mercedes and Ferrari are monitoring the Dutchman's progress closely. Both teams each have one driver out of contract at the end of this season, although championship leader Nico Rosberg appears likely to agree a new deal with Mercedes.
"Helmut Marko's been looking for chance to get Max Verstappen in the senior team," tweeted Sky F1's Ted Kravitz. "Kvyat gave him two. Plus strengthens RB's hand in bidding war."
Verstappen will have a seat fitting at Red Bull's Milton Keynes base this week and cannot wait to drive the RB12 for the first time at Barcelona.
"The next step in my relatively short career so far, is an amazing opportunity," he told his personal website. "I really want to thank Red Bull Racing and Dr. Helmut Marko for the confidence they have in me.
"I'll have the chance to learn a lot from the top team that is Red Bull Racing. I'm also looking forward to work with an experienced and proven team mate like Daniel Ricciardo.
"Together with Red Bull Racing we'll do everything to prepare me as best as possible for my first laps in the RB12 Tag Heuer, next week in Barcelona. I cannot wait for that special moment to happen."
Kvyat's Red Bull highs and lows
HIGH September 2014: Told by Helmut Marko and Franz Tost over breakfast ahead of Japanese GP qualifying he will replace Ferrari-bound Sebastian Vettel at the Red Bull senior team in 2015.
LOW February 2015: Crashes on one of his first laps in the new RB11 at the Jerez test, breaking the only front wing Red Bull have available at the time. Team complete some running without it.
LOW March 2015: Debut weekend to forget in Australia as he qualifies six places behind team-mate Ricciardo and then fails to make the start of the race when his car breaks down.
HIGH March 2015: Scores first points for Red Bull in Malaysia, beating Ricciardo to ninth, although both Red Bulls struggle in race after third-row qualifying positions.
LOW April 2015: Early-season form blighted by Red Bull technical issues, with engine failure in China followed by Q1 exit in Bahrain.
HIGH May 2015: Finishes then career-best fourth in Monaco, passing Ricciardo into Turn One at the start. "He's had to show some confidence and some self-belief because he was making mistakes, he wasn't particularly quick and the governor started complaining about him," says Sky F1's Martin Brundle.
HIGH July 2015: Keeps his head in chaotic Hungarian GP to finish second to Vettel amid run of nine points finishes in 10 races.
LOW September 2015: Huge barrel-roll crash in qualifying for the Japanese GP ruins his Suzuka weekend.
LOW October 2015: Error-strewn race at the US GP ends up against the barriers as Red Bull's others F1 drivers - Ricciardo, Verstappen and Carlos Sainz - all impress and score points.
HIGH November 2015: Proves the lead Red Bull runner throughout F1's return to Mexico, finishing fourth.
LOW March 2016: Doesn't take the start of the Australian GP for the second successive year when electrical failure strikes on formation lap.
HIGH April 2016: Wins Driver of the Day award in China after finishing third from sixth on the grid. Also wins praise for calm response to an angry Vettel ahead of the podium ceremony after the German accuses him of causing his crash with team-mate Kimi Raikkonen.
LOW May 2016: Crashes into Vettel twice in quick succession, which also triggers damage to Ricciardo's Red Bull, on nightmare opening lap at home Russian GP. "It completely screwed our race," says team boss Horner. Demoted to Toro Rosso four days later for the remainder of the season.