Ms Gordillo has rejected moves to link a teacher's continued employment to an evaluation.
But Ms Gordillo, the former leader of the teachers' union, ended up provoking a mutiny.
ECONOMIST: Uproar in the former ruling party is bad news for Vicente Fox
Gordillo has led the union, the largest in Latin America with 1.5 million members, since 1989.
Mexico's Attorney General, Jesus Murillo Karam, said Ms Gordillo, 68, had hurt the very union she leads.
BBC: Mexico union head Gordillo charged with organised crime
Gordillo was expelled from Mexico's Institutional Revolutionary Party in 2006 and helped found the New Alliance party.
So Ms Gordillo came up with an alternative plan, involving a tax on the production of food and medicine.
ECONOMIST: Uproar in the former ruling party is bad news for Vicente Fox
Mexican President Enrique Pena Nieto tried to reassure union members following Ms Gordillo's arrest and the enactment of the reforms.
BBC: Mexico union head Gordillo charged with organised crime
The other reason Ms Gordillo has been so instrumental to political life in Mexico is down to her self-coined "warrior" persona.
But he stressed that the union would not be going on strike nor causing civil disruption over the arrest of Ms Gordillo.
Gordillo, 68, is a powerful, well-known figure in Mexico, and news of her arrest sent shock waves through the country's political spheres.
In a brief court appearance on Wednesday, Ms Gordillo denied the charges.
Ms Gordillo, 68, was once considered the most powerful woman in Mexico.
The reforms appear set to weaken the powerful teachers' union, led by Elba Esther Gordillo, which has largely controlled access to the profession.
Gordillo rose to her influential position thanks to earlier PRI leaders, although she had strained those ties by supporting other parties in recent years.
When Mr Jonguitud was sacked as union head by the then president, Carlos Salinas de Gortari, in 1989, Ms Gordillo took over the top job.
CNNMexico.com could not immediately reach Gordillo's daughter, a senator for the New Alliance party, and the teacher's union had not responded to Gordillo's arrest late Tuesday.
Mr Madrazo is now likely to continue his drive to marginalise the more liberal wing of his party, headed by Elba Esther Gordillo, the teachers' union leader.
Tenacious, pragmatic and determined, Ms Gordillo began her union activities in the state of Mexico in the early 1970s, eventually becoming the protege of local union leader, Carlos Jonguitud Barrios.
Ms Gordillo, who has led the SNTE for the past 23 years, and who was elected unopposed to another six-year term in October, was not present at Monday's signing ceremony.
"We are looking at a case in which the funds of education workers have been illegally misused, for the benefit of several people, among them Elba Esther Gordillo, " he said.
BBC: Mexico union head Gordillo charged with organised crime
Such ambiguities also characterise his running-mate, Elba Esther Gordillo.
Analysts say the decision to name Mr Diaz as Ms Gordillo's successor so soon after she was arrested sends a clear message that she will face the charges against her on her own.
Gordillo was tossed out of PRI in 2006 and formed her own party, the New Alliance Party, or PANAL. She has since been a staunch adversary to Pena Nieto and made the changes in education law a priority.
FORBES: Mexico Union Leader's Arrest Has Market Ready For Reforms
Elba Esther Gordillo, who has led Mexico's high-profile national teachers union for more than two decades, was in federal custody after she was arrested at an airport outside Mexico City on Tuesday, the country's attorney general told reporters.
Pena Nieto has shown "that yes, he has the capacity to take decisions like arresting Elba Esther Gordillo, difficult decisions that require strength, " said Jose Antonio Crespo, a historian and researcher at the Center for Economic Research and Teaching in Mexico City.
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