His reappointment in Tony Blair's newly-created Labour government confounds critics who said that the Welsh Secretary role would be axed in the wake of devolution.
Mr Murphy, 53, the MP for Torfaen, has held the post for almost two years.
" Paul Murphy is a big hitter in Cabinet and has earned the respect and admiration of colleagues across the political spectrum "
Rhodri Morgan, Welsh Assembly First Minister
He said on Saturday that he was "delighted" to be asked by Tony Blair to continue to represent Wales at the cabinet table .
Welsh Assembly First Minister Rhodri Morgan said the appointment was good news for Wales.
"I welcome the re-appointment of Paul Murphy on a personal level and because it means continuity in our working relationship," he said.
"This gives us both the opportunity to build on the firm foundations already established," he added.
"Paul Murphy and I have forged an excellent working partnership which provides a vital link between the National Assembly and the Government in Westminster.
"Paul Murphy is a big hitter in Cabinet and has earned the respect and admiration of colleagues across the political spectrum.
"He will continue to ensure that the needs of Wales are vigorously represented in Cabinet."
Mr Murphy took over the role of Welsh Secretary in July 1999, following Alun Michael's appointment as First Secretary of the new Welsh Assembly.
Mr Murphy had previously served as the Northern Ireland minister for political development - a role which won him much praise both inside and outside his party.
In recent months, the big constitutional question has been whether Paul Murphy would be the last Welsh Secretary.
He was an opponent of devolution in 1979 and has not changed his views since the creation of the assembly.
In fact, some political pundits went as far as to say the decision to make him Secretary of State for Wales - just as the Welsh Assembly assumed its powers - seemed rather like putting the fox in charge of the chicken coop.
Mr Murphy swiftly defused any potential tension by saying times had moved on.
The transfer from the Northern Ireland Office to Wales Office mirrored Murphy's own family history.
As his name suggests, his antecedents are Irish. His great-grandfather came to Wales to work in the iron industry. His grandfather and father worked in the pits.
Born in south Wales in November 1948, Mr Murphy was educated at St Francis School, Absersychan and West Monmouth School, Pontypool.
After Oriel College Oxford and a short period as a management trainee, he worked as a lecturer in government at Ebbw Vale Further Education College.
He trod the traditional political path of becoming a member of Torfaen Borough Council, before winning the Torfaen seat for Labour in 1987. He has held it ever since.
Mr Murphy has enjoyed much success at the Wales Office.
He succeeded in getting legislation to expand the powers of the Children's Commissioners into the last Queen's speech, and negotiated Wales' share of Gordon Brown's extra spending in last July's Comprehensive Spending Review.