We study the impact of baryons on the distribution of dark matter in a Milky Way-size halo by comparing a high-resolution, moving-mesh cosmological simulation with its dark matter-only counterpart. We identify three main processes related to baryons -- adiabatic contraction, tidal disruption and reionization -- which jointly shape the dark matter distribution in both the main halo and its subhalos. The relative effect of each baryonic process depends strongly on the subhalo mass. For massive subhalos with maximum circular velocity $v_{\rm max} > 35 km/s$, adiabatic contraction increases the dark matter concentration, making these halos less susceptible to tidal disruption. For low-mass subhalos with $v_{\rm max} < 20 km/s$, reionization effectively reduces their mass on average by $\approx$ 30% and $v_{\rm max}$ by $\approx$ 20%. For intermediate subhalos with $20 km/s < v_{\rm max} < 35 km/s$, which share a similar mass range as the classical dwarf spheroidals, strong tidal truncation induced by the main galaxy reduces their $v_{\rm max}$. Moreover, the stellar disk of the main galaxy effectively depletes subhalos near the central region. As a combined result of reionization and increased tidal disruption, the total number of low-mass subhalos in the hydrodynamic simulation is nearly halved compared to that of the $\textit{N-}$body simulation. We do not find dark matter cores in dwarf galaxies, unlike previous studies that employed bursty feedback-driven outflows. The substantial impact of baryons on the abundance and internal structure of subhalos suggests that galaxy formation and evolution models based on $\textit{N}$-body simulations should include these physical processes as major components. 22 pages, accepted for publication in MNRAS
