Murray bested No. 1 Novak Djokovic 6-4, 7-5, 6-4 in Sunday's tournament final. It was the second Grand Slam title for Murray (2012 U.S. Open) and improved on his runner-up finish to Federer last year.
It also marked the first win at Wimbledon for a British man since Fred Perry in 1936.
Murray remains ranked No. 2, as he has been most of the year, but he narrows Djokovic's still-solid hold on No. 1 from 3,270 points to 2,950.
Federer lost in the second round at Wimbledon this year, meaning a net reduction in 1,955 points in the rankings. That drops him from third to No. 5. The last time Federer was out of the Top 4 in the rankings was June 2003, just before he won his first Wimbledon title.
In the intervening years, Federer, a month away from his 32nd birthday, piled up a record 17 Grand Slam titles while spending 237 consecutive (302 total) weeks at No. 1.
Federer's drop of two spots in the rankings lifts David Ferrer to third, marking a career best, and Nadal to No. 4. Juan Martin del Porto, who played Djokovic in the Wimbledon semifinals, improves one place to seventh, with Jo-Wilfried Tsonga pushed to eighth.
The other Wimbledon semifinalist was Jerzy Janowicz, who goes from 22nd to a personal high of No. 17 this week.
There are three tournaments on the ATP calendar this week but the only Top 10 player scheduled to compete is sixth-ranked Tomas Berdych, who is the top seed at the Skistar Swedish Open. Tommy Haas leads the field at the Mercedes Cup in Germany and Sam Querrey and defending champion John Isner are seeded 1-2 for the Hall of Fame Tennis Championships in Rhode Island.
The ATP Top 10 listing player, home country and rankings points total:
1. Novak Djokovic, Serbia, 12,310
2. Andy Murray, Great Britain, 9,360
3. David Ferrer, Spain, 7,220
4. Rafael Nadal, Spain, 6,860
5. Roger Federer, Switzerland, 5,785
6. Tomas Berdych, Czech Republic, 4,865
7. Juan Martin Del Potro, Argentina, 4,500
8. Jo-Wilfried Tsonga, France, 3,480
9. Richard Gasquet, France, 3,045
10. Stanislas Wawrinka, Switzerland, 2,915
Man behind Doritos Locos Tacos passed away on Thanksgiving
Theater accidentally screens 'Nymphomaniac' trailer instead of Disney's 'Frozen'