The government shakeup, which had been expected, is in the end relatively modest in scale. In addition to the naming of Ayrault, Hollande also named a member of the French Greens Party (EELV), Emmanuelle Cosse, as housing minister. Two other ecologist politicians were named as under-secretaries in the new government.
The news comes one day after veteran foreign minister Laurent Fabius bowed out of politics. Shortly after, Hollande put forward Fabius's nomination to head France's Constitutional Council.
Fabius's successor, 66-year-old Ayrault, was prime minister between 2012 and 2014.
The reshuffle comes as Hollande is seeking fresh political momentum 15 months before he seeks a second term. The French president's popularity rose after he took a tough approach on security following the 13 November terror attacks on Paris which killed 130 people. But three months later, the problem that has plagued him since he came to power in 2012 - France's stubbornly high unemployment - has dragged him back down to popularity ratings of around 19 per cent.
Hollande also finds himself under fire, not only from the opposition right-wing Republicans of his predecessor Nicolas Sarkozy, but increasingly from within the ranks of his own Socialist Party.
Like Ayrault, Hollande's former partner and mother of their four children, Segolene Royal had also been tipped to take over the foreign brief. Royal, a failed presidential candidate in 2007, remains a largely popular figure to Socialist Party supporters.