Herbert Diess, chief of the Volkswagen brand, was named to take over as CEO of the company as a whole.
VW Group will reorganized into six business areas and the China region, which is VW Group's largest market.
Diess also has a more diversified history in the automotive business than his predecessor Matthias Mueller.
The realignment focuses power in Diess' hands, as he will continue to oversee the namesake division. Audi would be excluded from this group and form its own premium division.
Brands are being subdivided into four separate groups: Volume, premium and super premium.
The appointment of Diess comes as VW investors are clamoring for increased profitability.
The powerful supervisory board, which devolves day-to-day management to the company's management board, is understood to have been looking at ways in which the company could be restructured following the Dieselgate scandal - the passenger vehicle brands within the Volkswagen Group are set to be divided into "volume", "premium" and "super premium" sections headed by Diess, Audi boss Rupert Stadler and Porsche chief Oliver Blume.
One sign of the overhaul gaining traction is VW entering the home stretch for a potential share sale in its heavy-truck division, the biggest organizational shift since the aftermath of the diesel-emissions crisis.
He has presided over a wide ranging restructuring of the company and its other brands.
Diess is a former BMW executive who since 2015 has headed the core Volkswagen brand. That project became much more urgent as the diesel scandal generated massive costs, and meant taking on established interest groups. The scandal has cost the company over $30 billion.
Sanford Bernstein analyst Max Warburton said Diess' track record of cost-cutting points to a more efficient VW under his leadership. But instead of being squeezed out, he has been pushed upward, and has been made CEO. It's a sign of real change at VW.
Separately, VW said works council executive Gunnar Kilian, a close aide to labor boss Bernd Osterloh, will replace group human resources chief Karlheinz Blessing who will stay at VW as an adviser.
Oliver Blume, head of sports vehicle brand Porsche and newly appointed to the group executive board, will oversee production at the multi-brand organization, VW said, confirming a Reuters report.