Ms Gillard said she believed her reshuffled cabinet was the team she would be taking to the next election.
The Prime Minister announced the cabinet reshuffle after federal Attorney-General Nicola Roxon and Senate leader Chris Evans formally announced their resignation from ministerial roles.
Ms Gillard's formally announced their resignations at a press conference in Canberra three days after she set September 14 as the federal election date.
LISTEN: Erdem Koc reports.
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She said personal reasons and health issues sometimes do get in the way of politics.
"I can't wish away the real world ... but this is the team I intend to take to the next election."
She said Mr Bowen had been looking for a new challenge and had been working in a difficult portfolio for some time.
Ms Roxon will move to the backbench until the election, when her departure will create a vacancy in her safe Melbourne seat of Gellibrand.
"My only regret as health minister is the inordinate amount of time we were too long fixing many of the problems that Mr Abbott left from his time as health minister," she said.
The prime minister says they first raised their futures with her a year ago.
Senator Evans says he'll also step down from the Senate in a few months when a suitable replacement can be found.
"I didn't want to serve following the next election," he told reporters.
Senator Evans said it had been a tremendous honour to be part of the Labor government and he had even been acting prime minister for a few days - and "nothing went terribly wrong" in that time.
A ballot to replace him as Senate leader will be held at Monday's caucus meeting.
Immigration Minister Chris Bowen will replace Senator Evans as minister for tertiary education, skills, science and research.
Ms Roxon became emotional as she said she was very proud of her role in the Labor government and of Ms Gillard's leadership.
"It is time to move on and I have reached that point," she told reporters.
She said she had not met her husband when she entered politics and if she contested the next election her daughter would be in high school by the time her term ended.
"Like Chris (Evans) I believe we can win the next election," she said.
Ms Roxon said she was "very torn" about leaving but she truly believed Mr Dreyfus would step into the role seamlessly.
Ms Roxon has been in Parliament since 1998 and Senator Evans has served for 20 years.
Victorian MP Mark Dreyfus will be promoted to attorney-general.
Senator Evans said there were no shortage of people who could serve in his role as senate leader.
"They will all have to make their decisions... there will be a strong field of candidates," he said.
"It is a challenging job, it does take a lot of time and energy."
But he said it was a good team and they were doing "OK".
Meanwhile, Opposition Leader Tony Abbott says the Australian people deserves a strong and stable government and he really hopes the prime minister can steady her ship and offer stable government.
Jason Clare has been appointed as Cabinet Secretary.
Caucus colleagues will come together on Monday to decide on Senate leadership.
Following the reshuffle, the Liberal Party's Christopher Pyne said Ms Gillard needs to convince voters the government is stable.
"The Prime Minister says she has been talking to Nicola Roxon for 12 months...The alibi of the Prime Minister doesn't add up."
CABINET RESHUFFLE:
Chris Bowen will replace Senator Evans as Minister for Tertiary Education, Skills, Science and Research.
Mark Dreyfus will replace Ms Roxon as Attorney-General and Minister for Emergency Management, passing on the role of Cabinet Secretary to Jason Clare, who retains Home Affairs and Justice.
Brendan O'Connor will become Minister for Immigration and Citizenship and Mark Butler takes on Housing and Homelessness.
Mike Kelly enters the Ministry as Minister for Defence Materiel.
Ms Gillard says she also welcomes new Parliamentary Secretaries Yvette D'Ath (Climate Change and Energy Efficiency), Kelvin Thompson (Trade) and Melissa Parke (Mental Health, Homelessness and Social Housing) and thanks Justine Elliot for her contribution in the Trade portfolio.
