This split will allow the Home Office to deal with terrorism, security and immigration and follows numerous problems affecting the department earlier this year which led home secretary John Reid to declare it "not fit for purpose".
He argued that the Home Office's previous remit was too broad for it to function effectively and that the new departments would be better able to focus on "the priorities of today's world and the priorities of today's people".
The new ministry has been welcomed by the Howard League for Penal Reform, but it warns that MoJ faces huge challenges.
Its director Frances Crook said: "We hope that this heralds a new age of rational policy formulation.
"The new ministry must pilot a significant and sustained reduction in the use of custody and the development of effective community sentences. The short term crisis of prison overcrowding can only be solved by investing long term in a sentencing structure that puts protecting victims and reducing re-offending at its core."
And the FDA, the union representing senior public servants, warned that adequate resources must back up the new ministry.
Rob O'Neill, FDA national officer, said: "The assertion that the Home Office can be split into two departments without requiring extra resources simply does not reflect the reality of experience with machinery of government changes.
"Splitting the department will do nothing to improve how the Home Office works. Clear priorities and adequate resources will. It is imperative that government reflects on the resources it is currently allocating to the Home Office to ensure they match the scale of the challenges it faces."
The Conservatives meanwhile have argued that the split will threaten judicial independence and will create weak leadership on public safety.
Shadow home secretary David Davis said: "The Home Office restructure will compound existing problems and create new ones. It will cost money, distract the management and introduce new divisions and communication failures.
"Many of the crises in the Home Office have been caused by different agencies not talking to each other - the last thing you should do is put these agencies in different departments."
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