Washington - President-elect Barack Obama nominated Hillary Clinton as secretary of state on Monday, bringing a former rival on the campaign trail into his cabinet, and announced Defence Secretary Robert Gates will stay on the job at the Pentagon.

Clinton, 61, his former rival, will leave her job as the senator from New York if confirmed to become the nation's next top diplomat. The reappointment of Gates, 65, will ensure a smooth transition with wars in Iraq and Afghanistan.

Gates became the head of the Pentagon under President George W Bush in December 2006, but he will be given a new mission under Obama to bring the conflict in Iraq to an end.

"I will be giving Secretary Gates and our military a new mission as soon as I take office: responsibly ending the war in Iraq through a successful transition to Iraqi control," Obama said in a news conference in Chicago.

Obama said during the campaign he would remove all US combat forces from Iraq within 16 months of taking office January 20. Obama's appointments require Senate confirmation. Obama's withdrawal plan is similar to the agreement with the Bush administration approved by the Iraqi government last week.

"We must pursue a new strategy that skillfully uses, balances, and integrates all elements of American power," Obama said.

In addition to Iraq and Afghanistan, Obama's national security and foreign policy team will have to address the nuclear activities of Iran and North Korea, the diminished US image in the world, and the difficult challenge of closing the prison for suspects in the war on terrorism at Guantanamo Bay, Cuba.

Clinton, defeated by Obama for the Democratic presidential nomination, said she will work to restore America's standing in the world following the Bush administration.

"We know our security, our values and our interests cannot be protected in advance by force along - nor by Americans alone," Clinton said.

Obama also named former Marine General James Jones to serve as national security advisor, and his foreign policy aide during the campaign, Susan Rice, to become ambassador to the United Nations.

Obama nominated Eric Holder to attorney general, the top law enforcement official, and Arizona Governor Janet Napolitano to head the Homeland Security Department.

Naming Clinton to head the State Department would bring a high-profile figure into his cabinet and further help heal wounds among Democrats over the dragged-out contest for the party's nomination.

Many Democrats who supported the former first lady refused to back Obama's candidacy for the White House.

"I have no doubt that Hillary Clinton is the right person to head our State Department," Obama said.

With Gates at the helm, Obama keeps in place a key architect of the troop buildup in Iraq that contributed to the sharp decrease in violence during the past 15 months.

"Afghanistan is where the war on terror began, and it is where it must end," Obama said. "And going forward, we will continue to make the investments necessary to strengthen our military and increase our ground forces to defeat the threats of the 21st century."

Asking Gates to stay on also helps Obama fulfill a pledge to have a bipartisan cabinet. Gates is a registered independent but has served in numerous Republican administrations. He replaced Donald Rumsfeld as Pentagon chief in December 2006.

"I am deeply honoured that the president-elect has asked me to continue as secretary of defense," Gates said. "Mindful that we are engaged in two wars and face other serious challenges at home and around the world ... how could I do otherwise?"

Jones, 64, was the commandant of the Marine Corps from 1999 to 2003 before becoming the NATO's top military commander in 2003. He retired in 2007.