A key member of the Somare group, which maintains it is still the legitimate Papua New Guinea government, has been replaced.
The Post Courier newspaper reports the move could pave the way for further political negotiations within the Somare camp.
The rival O'Neill administration claimed last week it had full control of the government, despite the Supreme Court ruling that Sir Michael Somare was the country's legitimate prime minister.
But the Somare camp says it is seeking declaratory judgements on the actions of the O'Neill government.
Sam Abal, who was acting prime minister for several months earlier this year while Sir Michael received medical treatment in Singapore, has relinquished the deputy prime minister's position and been replaced by Southern Highlands governor, Anderson Agiru.
The paper reports that Mr Agiru's appointment is a calculated move, ahead of the 2012 elections and with Sir Michael's retirement pending.
James Marape, Sir Michael's Education Minister, has also relinquished his ministerial portfolio to make way for negotiations with other partners in the Somare coalition.