His move comes as part of a larger Government reshuffle following work and pensions secretary Peter Hain's resignation yesterday.
Mr Hain stepped-down after the Electoral Commission referred its investigation into donations to his Labour deputy leadership campaign to the police.
Mr Timms joins the Department for Work and Pensions as minister of state for employment and welfare reform. His replacement as construction minister has not yet been confirmed although Baroness Vadera is set to take over some of his non-construction roles including deregulation. Mr Timms was the sixth construction minister since 2001.
Housing minister Yvette Cooper is being replaced by Caroline Flint MP, to become chief secretary to the Treasury. Ms Flint was previously minister for employment and welfare reform.