Ms Garrett was at loggerheads with Premier Daniel Andrews over the deal, which she said she could not support. She will now move to the backbench.
Ms Kairouz was elected unopposed in a very short Cabinet meeting.
Ms Garrett’s emergency services portfolio was given to Deputy Premier James Merlino, while Ms Kairouz will be responsible for consumer affairs, liquor licensing and gaming regulation.
Ms Kairouz was first elected as the member for Kororoit, which takes in the area around Deer Park and Rockbank in Melbourne’s west, in a by-election in 2008.
“It’s an absolute honour to be part of the Andrews Labor Government. I look forward to getting on with the work that the Premier has given me the responsibilities for,” Ms Kairouz said.
“I certainly look forward to working with the Labor caucus and the community in ensuring that people’s rights are protected around consumer affairs and that work around liquor and gaming gets done.”
Premier Daniel Andrews said Ms Kairouz was the best person for the job.
“I think when you look at Marlene’s experience, her work, her story she has all the qualities that a good Labor minister needs to deliver for those who often miss out without a passionate advocate and an effective advocate,” Mr Andrews said.
“I know that she’ll discharge her duties very well, she’s been a great Cabinet secretary and she’s going to be a fantastic minister.”
Ms Kairouz has been the Cabinet secretary since December 2014 and was previously the opposition whip.
Ms Garrett also congratulated her replacement on the way out of the Cabinet meeting.\