Mother-of-two Bishop Mullally is a self-described feminist, who ordains both men and women, and has been described as a 'theological liberal'. The role means she is the primary representative of the Church in the Royal Court.

But she recently said: 'I am very respectful of those who, for theological reasons, cannot accept my role as a priest or a bishop. My belief is that Church diversity throughout London should flourish and grow; everybody should be able to find a spiritual home.'

The move was announced by Buckingham Palace yesterday which confirmed that Lord Chartres, who has been Dean of the Chapels Royal since 1995, would be retiring after his 72nd birthday this summer.

He officiated at royal events including the confirmation of Prince William and the wedding of Lord and Lady Frederick Windsor, and has taken part in a variety of others, including the National Service of Thanksgiving to mark The Queen's Diamond Jubilee.

A confidante of the Prince of Wales for many years, he said: 'It has been a privilege to serve The Queen as Dean. I have hugely enjoyed the partnership with other members of the Royal Household and the superlative team in Her Majesty's Chapels Royal.'

Bishop Mullally, who worked in the health service for 20 years and previously held the role of Chief Nursing Officer, was ordained in 2001.

She said: 'It is an honour and a privilege to be appointed as Dean of the Chapels Royal. The role is one of great historical significance, playing an important role to this day, supporting Her Majesty and the Royal Family.'

The Dean of the Chapels Royal is an honorary appointment but in 1349 was historically the most important representative of the Church at the Royal Court, travelling with the Monarch at all times.

They were often called upon to administer solemn oaths upon a Bible when treaties or alliances were made in the field after some battle. He also arranged services in great country houses or wherever the monarch settled on a Royal progress.

By 1748, as the Royal Household became more established at the palaces based in London, the roles of Bishop of London and Dean of the Chapels Royal were usually held by the same person, while remaining separate offices. In this case, however, Lord Chartres kept the role on even after retiring as Bishop of London.

The Chapels Royal in England consist of The Queen's Chapel; the Chapel Royal, St James's Palace; the Chapel Royal, Hampton Court Palace; the Chapel of St Peter ad Vincula (Tower of London); the Chapel of St John the Evangelist (Tower of London); and The Queen's Chapel of the Savoy.