The Health Service Executive will cease to be in 2014 under planned new legislation published today by Minister for Health Dr James Reilly.
The Health Service Executive Governance Bill 2012 provides for a Director General and six Directorates.
It covers areas such as hospitals, primary care and public health.
Dr Reilly said the changes will improve patient care and make the system more accountable to the minister.
He said that current HSE Chief Executive Cathal Magee wrote to the Department of Health on Friday indicating his intention to step down.
Mr Magee was appointed in September 2010 for a five-year term and has waived his right to compensation for his remaining three years.
Dr Reilly said Mr Magee had not resigned and will be leaving during the transition period.
The changes come at a crucial time for the HSE, with a budget overrun of €280m and a projected overrun of €500m by the end of the year.
The Programme for Government promised to abolish the HSE and replace it with new structures.
Mr Magee denied suggestions that there are serious differences between him, Health Minister Reilly and the Department of Health about the way the health service is managed.
Speaking on RTÉ's News at One, Mr Magee also said that Minister James Reilly's actions and approach had nothing to do with his decision to step down.
Mr Magee said he took his decision because of Government plans to replace the existing HSE structure.
A new directorate with a Director General is proposed and Mr Magee has no interest in taking on this role.
He said his decision to step down was not taken quickly.
Mr Magee said that it had involved careful consideration over recent months when the emergence of the new structure was clear.
He said there were tensions and difficulties that go with the health portfolio at Ministerial and political level and at the level of the Chief Executive of the HSE.
However, he denied that his decision had anything to do with these tensions.
Reacting to the announcement of the reforms the Irish Nurses and Midwives Organisation said they would not have any major consequences in the delivery of health care.
Dave Hughes, from the IMNO, said the changes were necessary but were of a technical and administrative nature.
He said the reforms would mean the minister would have more direct control of funding.
Meanwhile, the Patients Association said it remains to be seen how successful the changes will be.
Stephen McMahon said the record of the management of change in the public service is not good and said today's announcement is an opportunity to ensure we get things right once and for all.
Fianna Fáil leader Micheál Martin said the planned changes were cosmetic but not fundamental.
Speaking on RTÉ's Six One News, he said the HSE was not really being abolished, because the same health professionals would continue to work in hospitals and the same management systems would continue to exist.
Earlier in the Dáil, Mr Martin said Dr Reilly is a volatile minister and senior personnel have left the HSE because of his behaviour.
He said Mr Magee is a man with integrity and was put in an impossible position 12 months ago when the HSE board was abolished.
He said it was without question that Mr Magee was shoved from his position in an unacceptable manner.
Taoiseach Enda Kenny said he was not shoved and Mr Magee indicated his intention to step down as new structures were agreed for the HSE.
Minister of State at the Department of Health Róisín Shortall has expressed regret to learn from media reports that Mr Magee intends to step down.
She said his departure is a ''significant blow to the health service'' and that he will be badly missed ''in this very challenging time of severe budgeted pressures''.
Sinn Féin health spokesperson Caoimhghín Ó Caoláin said Mr Magee’s departure raises "serious concern".
Mr Ó Caoláin said: "He was an able administrator and engaged openly with the Oireachtas.
"It is very significant that Minister of State Róisín Shortall has expressed regret at the departure and has said she learned of it from the media."