Earlier on Sunday, Mr Sarkozy reappointed Francois Fillon as prime minister.
Most of the other big figures from the outgoing government remain in place.
Christine Lagarde will remain as economy minister, while Brice Hortefeux is staying on as interior minister.
Mr Juppe is a former prime minister, while Ms Alliot-Marie was justice minister.
Mounting tension
With his popularity at rock bottom, President Nicolas Sarkozy could have seen the reshuffle as a moment for a change of direction, says the BBC's Hugh Schofield. Instead, the president has calculated that it is in sticking to the course that lie his best hopes for re-election in 2012.
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Analysis
Christian Fraser
BBC News, Paris
Three weeks ago, they were bidding farewell to Francois Fillon. There was speculation he would be replaced by his energy minister, Jean-Louis Borloo. But this prime minister is more popular than the president - and particularly popular within the ruling party. Some say Mr Fillon's reappointment further undermines the president's power and credibility.
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