CAIRO, Egypt (AP) — Egypt's Islamist president ordered the retirement of the defence minister and chief of staff on Sunday and made the boldest move so far to seize back powers that the military stripped from his office right before he took over.

It was not immediately clear whether President Mohammed Morsi's surprise decisions had the military's blessing. But the appointment of outgoing Defence Minister Field Marshal Hussein Tantawi and Chief of Staff General Sami Annan as presidential advisers suggested that the nation's top two soldiers may have agreed, perhaps reluctantly, in advance. Morsi awarded them two of the country's highest honours.

Adding to the sweeping changes in the military leadership, the president also ordered the retirement of the commanders of the navy, air defence and air force, but named two of them to senior positions. He appointed a senior judge, Mahmoud Mekki, as vice-president. Mekki is a pro-reform judge who publicly spoke against election fraud during Hosni Mubarak's 29-year rule before he was ousted in last year's uprising.

Hours after announcing the shake-up, a confident looking Morsi appeared at a religious ceremony to hand monetary awards to young Muslims from Egypt and elsewhere who have learned the Quran, Islam's holy book, by heart. Thousands of jubilant Morsi supporters, meanwhile, gathered at night to celebrate in Tahrir Square, birthplace of the uprising that ousted Mubarak 18 months ago. Another crowd of supporters formed outside the presidential palace in Cairo's suburb of Heliopolis.

Mohammed Aboul-Ghar, a founder of the new Egyptian Social Democratic Party — a secular group critical of the military as well as Morsi's Muslim Brotherhood — said the power struggle has now been settled in Morsi's favour.

"The military council was forced out of power and lost its position and this was inevitable," he said. "In the power struggle, the military council was increasingly weakened because of its decisions" and its failure to secure a more straightforward path to democratic transition, he said.

Morsi, a US-educated engineer, has been intensely seeking to assert his authority in the face of the powerful military. On Wednesday, he fired the nation's intelligence chief after militants killed 16 Egyptian soldiers along the border with Israel in Sinai. He was sacked after it was disclosed in the Egyptian media that he failed to act on an Israeli warning that an attack was imminent in the Sinai peninsula.

Egypt's first democratically elected president and the first who does not hail from the military, Morsi has since the August 5 attack on the soldiers made two visits to Sinai in the company of top commanders, chaired several meetings with the armed forces' top brass and made a point of calling himself the supreme commander of the armed forces during televised speeches.

The Muslim Brotherhood won both parliamentary and presidential elections in the first free and fair votes in Egypt's modern history. The group had been repressed under Mubarak, who ran a secular state.

The Supreme Council of the Armed Forces (SCAF), which ruled Egypt for 17 months, stripped the presidency of many of its key powers before it handed the reins of office to Morsi on June 30. Tantawi was the head of SCAF an Annan and number two in the ruling council.

The two men appointed to replace them were also members of the SCAF — something that could indicate either the military's agreement to the shuffle or splits at the highest level of the armed forces.