Prime Minister Malcolm Turnbull says he is disappointed after the High Court ruled and Deputy Nationals Leader Fiona Nash ineligible for federal parliament.
Mr Turnbull will assume the agriculture and water resources portfolio from Mr Joyce.
"We ... are obviously disappointed that the court has found against Barnaby Joyce and Fiona Nash," he told reporters in Canberra on Friday, after the High Court decision.
The decision means the government will need the support of at least one crossbench MP on the floor of parliament's lower house for confidence, supply and any of its legislation.
The one bright note for the government was the return of Nationals senator Matt Canavan to cabinet as resources minister after the court ruled he was not disqualified.
The Prime Minister also announced the High Court decision would be referred to a parliamentary committee to consider whether changes are needed to the Section 44 of the Constitution, which bars politicians from holding dual citizenship.
He insisted the government held a majority in the House of Representatives despite the loss of Mr Joyce.
"We have a majority of members in the House of Representatives, even in the absence of Barnaby Joyce and, of course, as you know, we have support from the crossbench," Mr Turnbull said.
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"The Prime Minister should explain how he got it so wrong, that he would declare what the High Court would say and he got it wrong," Deputy Labor Leader Tanya Plibersek said following the High Court decision.
"What Australians will know by the end of today is we have a hung parliament with a minority government and the Prime Minister has been wrong in his judgements this whole time."
Mr Turnbull had always been adamant the High Court would find in favour of the government.
Ms Plibersek attacked Mr Turnbull for having "reckless judgement" in keeping Mr Joyce and Ms Nash in cabinet, despite uncertainty over their ministerial decisions.
"Every decision made by Barnaby Joyce and Fiona Nash since October last year is under a legal cloud," she said.
Labor has received legal advice claiming any decisions made by Mr Joyce and Ms Nash were open to a challenge.
The Prime Minister said Mr Joyce was the best person for the seat of New England for the by-election to be held on December 2.
“I'm confident that … he will win once again the support of the people of New England.”
Nationals Senator Matt Canavan, who was cleared by the court, will be sworn in in his old portfolio of Resources and Northern Australia.
