U.S. president-elect Barack Obama, left, announces Monday in Chicago that Sen. Hillary Clinton, right, is his choice for secretary of state. (John Gress/Reuters)

Promising a White House filled with vigorous debate, U.S. president-elect Barack Obama named Senator Hillary Clinton as secretary of state and asked the Republican-appointed defence secretary to remain on the job.

Obama announced key members of his defence team Monday during a news conference in Chicago, as his cabinet picks stood behind him on the flag-draped stage.

Along with Clinton and Defence Secretary Robert Gates, Obama introduced retired marine general James Jones as White House national security adviser, former Justice Department official Eric Holder as attorney general and Arizona Gov. Janet Napolitano as secretary of homeland security.

He also appointed campaign foreign policy aide Susan Rice as his ambassador to the United Nations.

Obama said he would make her a member of the cabinet, an increase in stature from the era of President George W. Bush.

'The buck will stop with me.'—Barack Obama, U.S. president-elect

"I am a strong believer in strong personalities and strong opinions. That's how the best decisions are made," Obama said, noting a White House administration "wrapped up in group think" is a danger.

"I will welcome vigorous debate inside the White House, but understand I will be setting policy as president. The buck will stop with me."

Clinton will 'command respect'

Obama defended his choice of Clinton for the country's top diplomat despite criticizing her foreign credentials during the bitter campaign for Democratic nominee leading up to last month's presidential election.

Clinton already knows many world leaders and will "command respect" around the globe, he said. The two share a core view that U.S. military power must be combined with diplomatic powers, said Obama.

Clinton said that while leaving the Senate would be tough, she felt the best way to continue to serve the country would be to accept Obama's offer.

"America cannot solve these crises without the world and the world cannot solve them without America," she said.

The president-elect laughed when asked if Gates, who was appointed by Bush two years ago, filled the Republican requirement for his cabinet, a promise he made during the election campaign. Obama said the whole point of his cabinet postings is that he isn't checking their voter registration cards.

Gates commands the respect of the miltary and Congress for his "pragmatism and competence," said Obama.

Gates said he was "mindful that we are engaged in two wars and face other serious challenges at home and around the world."

The president-elect campaigned on a call to pull out most combat troops within 16 months of taking office, a period he said he still believes "is the right time frame."

'The time has come for a new beginning': Obama

The announcements rounded out the top tier of the team that will advise the incoming chief executive on foreign and national security issues in an era marked by wars in Iraq and Afghanistan, and terrorism around the world.

"The time has come for a new beginning, a new dawn of American leadership to overcome the challenges of the 21st century," Obama said.

"We will strengthen our capacity to defeat our enemies and support our friends. We will renew old alliances, and forge new and enduring partnerships."

Clinton, Holder and Napolitano all require confirmation by the Senate. Jones, as a White House official, does not. Nor does Gates, already confirmed to his post.

Former U.S. president Bill Clinton issued a statement Monday saying his wife's work in the Senate and knowledge of foreign leaders make her "the right person for the job."

"As her husband, I am deeply proud," said the former president.

To clear the way for his wife's nomination, Clinton had to agree to limits on the funding and management of his foundation, and to submit his own speaking schedule for approval.

With files from the Associated Press