BARACK OBAMA has announced a national security team led by his former rival Hillary Clinton as secretary of state with President George Bush's defence secretary Bob Gates remaining at the Pentagon.
Mrs Clinton, who will give up her seat as a senator for New York, promised to "reach out to the world again" to tackle global challenges multilaterally.
"The American people have demanded not just a new direction at home, but a new effort to renew America's standing in the world as a force for positive change," she said.
Mr Obama played down his clashes with Mrs Clinton over foreign policy during the campaign, insisting that their disagreements had been magnified and declaring that they shared a vision of US interests in the world.
"She possesses an extraordinary intelligence and toughness, and a remarkable work ethic," he said.
"She is an American of tremendous stature who will have my complete confidence, who knows many of the world's leaders, who will command respect in every capital and who will clearly have the ability to advance our interests around the world."
Mr Obama named retired general Jim Jones as his national security adviser and former assistant secretary of state Susan Rice as ambassador to the UN.
Eric Holder, who served in Bill Clinton's justice department, will be attorney general and Arizona governor Janet Napolitano will head the Department of Homeland Security.
Mr Obama said that Ms Rice would be a full member of the cabinet - unlike UN ambassadors under Mr Bush.
"The national security challenges we face are just as grave - and just as urgent - as our economic crisis," Mr Obama said.
"We are fighting two wars. Old conflicts remain unresolved, and newly assertive powers have put strains on the international system. The spread of nuclear weapons raises the peril that the world's deadliest technology could fall into dangerous hands. Our dependence on foreign oil empowers authoritarian governments and endangers our planet."
Mrs Clinton's appointment came after her husband agreed to disclose the names of donors to his charitable foundation and to clear foreign travel and speeches with the state department from now on.
"She is the right person for the job of helping to restore America's image abroad, end the war in Iraq, advance peace and increase our security . . . for our children," the former president Bill Clinton said.
Mr Obama acknowledged that there were disagreements on some issues within his national security team and said he welcomed the prospect of vigorous debate.
"But understand, I will be setting policy as president," he said. "I will be responsible for the vision that this team carries out, and I will expect them to implement that vision once decisions are made."