Prime Minister Justin Trudeau is promising a new nation-to-nation relationship with Canada's Indigenous people, shaking up the paternalistic and colonial structures of the Department of Indigenous and Northern Affairs with the aim of scrapping the 1876 Indian Act.

In a significant cabinet shuffle on Monday, Mr. Trudeau split the sprawling Indigenous Affairs portfolio into two separate departments to signal the Liberal government's intention to improve the lives of Indigenous peoples, including a renewal of an earlier pledge to bring about self-governance.

"We are demonstrating with this change today that we are serious about taking the right steps to move beyond the Indian Act, but doing it in partnership and collaboration with Indigenous peoples," Mr. Trudeau told a news conference after a cabinet shuffle. "We are moving forward on a true nation-to-nation relationship."

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Jane Philpott, who as health minister distinguished herself in negotiating a new federal-provincial health accord, takes on the new portfolio of Minister of Indigenous Services. She will oversee health care, drinking water, housing and other well-being issues that affect Indigenous peoples, such as dealing with the suicide crisis on many reserves.

Carolyn Bennett, who had been in charge of the whole department, is now responsible for the long-term goal of ending the 1876 Indian Act, which gives the federal government control over most aspects of Indigenous life, including land, band administration, resources, education and health.

"This is about recognizing that the structures in place at Indigenous and Northern Affairs Canada were created at a time where the approach around the Indian Act, the approach around our engagement with indigenous peoples, was very much looked at in a paternalistic, colonial way," Mr. Trudeau said

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Dr. Bennett will focus on negotiating treaty rights and land claims as Minister of Crown-Indigenous Relations. She had at times struggled in the massive portfolio, including with the turmoil over the inquiry into missing and murdered women and girls.

The shuffle was much wider than expected, with the Prime Minister promoting B.C. MP Carla Qualtrough to Public Services and Procurement from sports and disabilities, and Moncton MP Ginette Petitpas Taylor to Health.

Ms. Petitpas Taylor had been the parliamentary secretary at finance, where she impressed the Prime Minister and his senior team. She will be involved in legalizing marijuana and dealing with the opioid crisis.

Ms. Qualtrough said she is "super excited" about tackling Public Services, even though she must grapple with the problems of the Phoenix computer pay system for civil servants.

"This really is an unacceptable situation," Ms. Qualtrough said. "You deserve to be paid for the work that you have done. We are headed in the right direction, but there are many obstacles to overcome still."

Liberal MP Seamus O'Regan, a former host of the television program Canada AM and a close friend of Mr. Trudeau, was moved from the backbenches to Veterans Affairs. He will represent Newfoundland and Labrador at the cabinet table, replacing Judy Foote, who stepped down for family reasons.

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Mr. Trudeau was asked why he appointed a friend to cabinet when other Liberal MPs from the province are also qualified.

"With regard to Seamus, yes, he is a friend, but he is also someone who can represent Newfoundland and Labrador and has the skills to do an extraordinary job for veterans," he said.

Mr. Trudeau said he has no worries that Mr. O'Regan, who went into a 40-day alcohol-treatment program in 2016, would return to drinking.

"I feel great," Mr. O'Regan said. "My medical team is very happy with me and my progress. In actual fact, the stresses and strains of purposeful work is something that I find completely invigorating and keeps me very healthy."

Calgary MP Kent Hehr, who struggled with the Veterans portfolio, was demoted to Sports and Disabilities.

Dr. Philpott takes over responsibility for Indigenous services on the day the United Nations' Committee on the Elimination of Racial Discrimination slammed the federal government for underfunding family and children's services, including education.

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The committee said it was "alarmed" that despite decisions from the Canadian Human Rights Tribunal "less money is reportedly provided for child and family services to Indigenous children than in other communities and that this gap continues to grow."

NDP MP Romeo Saganash said the Liberals should do more than shift ministers, but take concrete action to end discrimination.

"The long-standing injustices cannot be addressed by any symbolic change, and I reiterate the NDP's call on the Liberal government to comply with legal orders to end discrimination of First Nations kids," he said.

Assembly of First Nations National chief Perry Bellegarde said Monday's cabinet announcement shows Ottawa is serious about acting on the 1996 Royal Commission on Aboriginal Peoples' recommendations to improve the delivery of services dramatically and fast-track self-government.

Mr. Bellegarde said he expects talks will focus on how to move specific powers, such as defining band membership, from the Indian Act to First Nation governments.

"If we don't want federal laws or provincial laws to apply to us as First Nations people, we have to occupy the field and create our own laws," he said. "You're going to start to see a lot more of that nation-to-nation recognition of that and respect for jurisdiction on all sides."

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In addition to treaties and governance, Mr. Bellegarde said he will keep pushing for better results on "day-to-day issues" such as overcrowded housing, skills training and reducing the number of boil-water advisories on reserves.

Canada has more than 600 First Nation reserves. However, the Royal Commission noted that many are too small in population and geography to become fully self-governing.

The commission recommended that Ottawa focus on reaching self-government agreements with the 60 to 80 historically based Indigenous nations that would allow them to provide services such as education for their member First Nations.

An example of this approach was announced earlier this month, when Ottawa and Ontario reached a deal with the Anishinabek Nation to implement a self-governing Anishinabek education system.

One First Nations community leader said the decision to split the Indigenous and Northern Affairs Department was welcome, but the bigger test will be ensuring the bureaucracy is in place to support the new vision and that funding matches needs.

"It's going to require money," said Cindy Blackstock, executive director of the First Nations Child and Family Caring Society of Canada. "We need to have the Parliamentary Budget Officer cost out all the areas of inequity and then develop something akin to what the Marshall Plan was after the Second World War."

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Some groups, including several Indigenous leaders, want Ottawa to remove the name of Canada's first prime minister from government buildings and monuments because his role in establishing the Indian Act.

"I can say unequivocally there are no plans by the federal government to change the name of John A. Macdonald off anything in our responsibility," Mr. Trudeau said.

The shuffle maintains gender parity in the cabinet with 15 men and 15 women if the Prime Minister is not included.

The Prime Minister's Office is also shuffling ministerial chiefs of staff. Principal secretary Gerald Butts and chief of staff Katie Telford have been meeting with chiefs of staffs and assessing their effectiveness.

Some Liberals see it as an opportunity for the PMO to gain control over underperforming ministerial offices. The drawback is that these chiefs of staff may be unwilling to challenge the PMO even when it is wrong.