Brazil President Dilma Rousseff has appointed her predecessor Luiz Inacio 'Lula' da Silva as chief of staff, according to a senior Congress official.
It is a move that could help Lula avoid possible detention in expanding corruption investigation that have now touched the top of Brazil's political leadership.
The head of the government coalition in the lower house of Congress, Jose Guimaraes, confirmed the appointment on Twitter after a meeting of Rousseff, Lula and senior ministers on Wednesday morning.
The move offers Lula short-term protection from prosecutors who have charged him with money laundering and fraud.
Lula's return to government may also spell a change of economic tack, as he has openly criticised austerity efforts and called for more public spending to end Brazil's worst recession in decades.
Brazil's currency slid nearly two percent on Wednesday and has lost almost seven percent this week as Dilma's invitation to Lula raised expectations of a sharp policy swing.
Meanwhile, Lula's return to Brasilia on Tuesday was overshadowed by a barrage of fresh corruption accusations by Senator Delcidio do Amaral, a close Workers' Party ally of the president until he was arrested last year.
In plea bargain testimony, Amaral said Rousseff knew about a massive graft scheme at state-run oil company Petrobras and one of her ministers had tried to buy his silence.
Brazil's economic downturn
Rousseff's popularity has been pummeled by Brazil's worst economic downturn since the Great Depression and the sprawling two-year-old corruption investigation stemming from Petrobras.
More than a million people marched in demonstrations across Brazil on Sunday, calling for Rousseff's impeachment and applauding the graft probe that has turned up evidence of political kickbacks paid by Petrobras contractors.
Once appointed, Lula can only be tried in the Supreme Court, placing him out of the reach of ongoing state and federal probes.
The Supreme Court will meet on Wednesday to decide on the rules of the impeachment process launched against Rousseff in December.