Schmidt will step aside on April 4 and make way for Page -- who created the company with fellow Stanford University alumnus Sergey Brin in 1998 -- to take the reins of a company that has dominated Internet search for a decade but is in danger of losing traffic to social networks like Facebook and Twitter.
"Day-to-day adult supervision no longer needed!" Schmidt tweeted after the announcement.
Schmidt, who became CEO in 2001 to bring more management experience to a then-fledgling company, will assume the role of executive chairman, focusing on deals and government outreach, among other things. Brin will concentrate on strategic projects.
"Larry is ready. It's time for him to have a shot at running this," Schmidt told analysts on a conference call.
Shares in the Internet search and advertising leader rose about 2 percent to USD 639 in extended trading.
Just days ago, Apple Inc CEO Steve Jobs announced a leave of absence, leaving lieutenant Tim Cook in charge of day-to-day operations. Like Google, Apple also announced results this week that blew past Wall Street's estimates.
"The Street will think it's a negative, that there is probably some issue going on. Google is trying to get more efficient and trying to get a tech guy in the seat to compete with Facebook," said UBS analyst Brian Pitz. "I don't think it changes anything strategically where the company is headed."
News of the change came as Google reported a 29 percent surge in both net profit and net revenue that beat forecasts.
Net income, excluding items, of USD 8.75 a share outstripped Wall Street's average forecast of $8.10.
Net revenue, excluding fees paid to partner websites, was USD 6.37 billion. Analysts polled by Thomson Reuters I/B/E/S, on average, were expecting net revenue of USD 6.06 billion.
On a conference call with analysts, Google CFO Patrick Pichette said a 10 percent, across-the-board pay raise instituted late last year was a direct attempt to staunch a flow of talent to hot Web upstarts in the Valley.
Google tried to buy fast-growing online local-shopping service Groupon for USD 6 billion but was rebuffed, Chicago Breaking Business, a Tribune Newspaper website, and other news outlets reported.
The question is whether Facebook's success could start to cut into Google's business, as investors debate whether marketers will advertise on both online services, or shift advertising dollars from Google to the world's largest social network.
Google said the management change was made as part of a plan to "streamline" decision making and create clearer lines of responsibility and accountability at the top.
"It's a good move. It (the triumvirate management structure) was always one of things that concerned us a little bit," said Ryan Jacob, portfolio manager with the Jacob Internet Fund. "It should streamline the decision-making process. They're in a fast-moving industry."
"As Google has grown, managing the business has become more complicated. So Larry, Sergey and I have been talking for a long time about how best to simplify our management structure and speed up decision making," Schmidt said in a posting on the company's official blog.
"And over the holidays we decided now was the right moment to make some changes to the way we are structured."
Google also reported fourth-quarter financial results, beating Wall Street's net revenue expectations.
Schmidt said on his blogpost that Page, the son of a Michigan State University computer science professor, will now lead product development and technology strategy, areas that are "his greatest strengths."