The UK Border Agency is to be scrapped and brought directly under ministers' control for the first time in five years to end its "closed, secretive and defensive culture".
The "troubled" agency will be split into an immigration and visa service and an immigration law enforcement organisation, Home Secretary Theresa May said.
After a raft of damning inspections and reports, the Agency will return to Home Office supervision rather than running at arm's length under the control of a chief executive.
But in a leaked memo, the head of the Home Office, permanent secretary Mark Sedwill, told staff they will "still be doing the same job" despite new reforms.
The opposition said "splitting the organisation again and again" was not enough, while Mrs May said the Government was "getting to grips" with the system it had inherited.
"The Agency has been a troubled organisation since it was formed in 2008 and its performance is not good enough," the Home Secretary said.
The move comes after a group of MPs warned it would take the UKBA 24 years to clear a backlog of asylum and immigration cases the size of Iceland's population.
Political correspondent Carl Dinnen reports: