Lancaster will now oversee the entire England structure.
Twelve months after being a relative unknown placed in interim charge of the England team, Lancaster is now effectively the RFU's elite rugby director responsible for all national teams and player development.
The England structure has been carved out of Rob Andrew's current responsibilities, leaving him clear to concentrate on his main task of renegotiating the RFU's new deal with Premiership Rugby.
The latest restructure was recommended by Peter Keen, the former UK Sport performance director, and Sir Ian McGeechan in a report commissioned in the wake of last year's Rugby World Cup debacle.
Lancaster and Andrew both had significant input into the review.
"This is the option the five of us believe is the right structure to optimise the performance of the England team," said RFU chief executive Ian Ritchie.
The RFU board has also backed a recommendation for a new rugby performance centre - akin to the Football Association's St George's Park complex - to be established by the end of 2016.
Less than two years ago, Lancaster applied to become the RFU's new performance director, a position that was subsequently scrapped from the structure when John Steele was ousted as chief executive.
Under this new structure, Lancaster will head up the newly-created international performance department. The RFU will recruit a new head of player development to report into him.
But Ritchie insisted the new role would not divert Lancaster away from his primary focus of being England head coach.
"Stuart believes this is absolutely the right way to go. Elements of what we're talking about, he is doing anyway. He is very comfortable," Ritchie said.
"I don't see this as adding a burden of responsibility on Stuart - a time-consuming thing diverting him away from the senior England team.
"The England set-up is very plugged into the RFU. Stuart will continue to get a lot of support from me, from Rob Andrew and from this new key role that will come in.
"That is a serious grown-up role. It is someone who will have a key role in the development of England teams.
"It will be a seriously mature person who will be able to deal with a lot of these things on his own. He has to report into Stuart."
Ritchie was not closed on the idea of recruiting someone from outside rugby to work as Lancaster's head of player development - but he stressed it would be an RFU appointment.
In other words, the future of the new head of player development will not be tied in to the fate or the success of the England national team.
"What you are doing is putting into place a structure that lasts beyond any particular head coach," Ritchie said.
"This is an RFU full-time, permanent position. It's not like a football scenario where, if the manager changes, the whole coaching team changes. It is a full-time development role."
One of the reasons the performance director role was scrapped in 2011 was over a disagreement as to where it fitted into the hierarchy. There were questions over whether the top man was the head coach or the performance director.
Now it is the same person in Lancaster, with Andrew relinquishing all responsibility for the performance department which he has overseen in one guise or another since he joined the RFU.
Andrew has held four different roles over the last two years.
Although Ritchie insisted the review had been about structure not individuals, he admitted Andrew's position had been questioned.
But Andrew's success in negotiating the current agreement with the Premiership clubs stood him in good stead, with talks over a new deal due to start next year.
Lancaster proposed a national training centre in his interview for the permanent head coach's job and that proposal was fully supported by Keen and McGeechan.
Ritchie would not rule out a partnership with the FA or another sporting body but ideally the RFU wants a specialist rugby centre of excellence.
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