Pope Francis has made an Italian lawyer the first woman to hold a management position in the Vatican's most important office.
Francesca Di Giovanni, 66, will serve as undersecretary for multilateral affairs in the Secretariat of State.
She will be responsible for co-ordinating the Holy See's relations with groups including the UN.
Pope Francis has been vocal in his support for women holding greater positions of authority in the Vatican.
"I hope that my being a woman might reflect itself positively in this task, even if they are gifts that I certainly find in my male colleagues as well," she told Vatican media.
Ms Di Giovanni has worked for the Vatican for 27 years and holds a law degree.
She has specialised in areas including migration and refugees, the status of women, intellectual property and tourism.
"The Holy Father has made an unprecedented decision, certainly, which, beyond myself personally, represents an indication of an attention towards women," she said.
"But the responsibility is connected to the job, rather than to the fact of being a woman."
Pope Francis the reformer?
The appointment comes as Pope Francis - who is considered a progressive - considers easing a ban on married men serving as priests.
His predecessor Pope Benedict XVI made an appeal to defend celibacy in a new book.
For many, celibacy is a key part of being a Catholic priest, one who is supposed to devote himself to the Church and not be distracted by what some consider to be worldly concerns like a wife or a family.
Many traditionalists are concerned about the direction in which Pope Francis is taking the Church.
This has included his push for a "healthy decentralisation" of the Church, which some worry could lead to a break up its universal message and sow confusion among the faithful.