US President-elect Barack Obama named former rival Hillary Clinton as secretary of state on Monday and said Robert Gates would remain defense secretary in a national security team charged with recasting America's leadership role in the world.

Clinton and Gates, who have been at odds with Obama in the past over foreign policy and defense issues, will implement Obama's vision of rebuilding the US image abroad while overseeing wars in Iraq and Afghanistan.

Obama played down differences with the woman he narrowly beat for the Democratic presidential nomination and said he would welcome vigorous debate among his opinionated team.

"I assembled this team because I am a strong believer in strong personalities and strong opinions. I think that's how the best decisions are made," Obama said, calling the former first lady a "dear friend."    

"I will be responsible for the vision that this team carries out and I expect them to implement that vision once decisions are made," Obama added. "So as Harry Truman said, the buck will stop with me."    

On one of the biggest foreign policy issues his administration will face, Obama repeated his belief that US troops could be out of Iraq within 16 months of his taking office, though he said he would consult advisers on that.

Clinton, standing next to her former opponent, said the United States must rely on its friends to help confront threats like global warming and terrorism -- an implicit rebuke to the go-it-alone approach of President George W Bush.

"While we are determined to defend our freedoms and liberties at all costs, we also reach out to the world again, seeking common cause and higher ground," she said.

"By electing Barack Obama our next president, 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."    

The New York senator said it would be hard for her to leave the US Senate but believed taking over the nation's top diplomatic role was the best way for her to serve the country.

Along with Clinton and Gates, Obama named retired Marine Gen James Jones as national security adviser and Arizona Gov Janet Napolitano as head of the homeland security department.

He also named former Justice Department official Eric Holder as attorney general and Susan Rice, a foreign policy adviser to his presidential campaign, as UN ambassador, which he will make a Cabinet-level position.

All the nominees are expected to win quick confirmation by the Democratic-controlled Senate, although the Cabinet itself may be a more fractious place.

"No doubt there will be frictions at times," said Stephen Flanagan of the Center for Strategic and International Studies think tank.

The announcements have been given added emphasis by last week's rampage in Mumbai, India, where gunmen killed nearly 200 people, including at least five US citizens. India has blamed the attacks on militants from Pakistan, which has denied any complicity with the terror plot.

Obama said he had spoken to Indian Prime Minister Manmohan Singh and offered American support. Obama said that while sovereign nations "obviously have the right to defend themselves," he did not want to comment on the specifics surrounding the Mumbai attack.

Gates has said he wanted to leave at the end of Bush's last term and it is unclear how long he plans to serve in Obama's administration.

While he avoided direct criticism of Obama during the election campaign, Gates has argued against setting timetables for a US pullout from Iraq, saying it could jeopardise security gains made over the past year.

But Democrats and Republicans both praised Gates since he took over the Pentagon from Donald Rumsfeld in 2006 and he will provide continuity as the United States fights two wars.

Obama clashed with Clinton during a bitter campaign for the Democratic presidential nomination. Clinton famously ran an advertisement depicting a 3 am crisis call at the White House to argue that Obama, a first-term Illinois senator, was not ready to be commander-in-chief.

Clinton also tended to talk tougher, once saying she would "obliterate" Iran if it attacked Israel. She criticized as "naive" Obama's call for direct presidential-level engagement with foes like Iran and North Korea.

Obama played down those differences on Monday, saying the two shared a vision for US foreign policy and wouldn't have joined forces if they didn't believe they could work together.

Clinton's husband, former President Bill Clinton, agreed to make public the names of more than 200,000 donors to his foundation as part of a deal with Obama to clear the way for his wife's nomination and avoid any appearance of conflict of interest with her duties as secretary of state.

Bill Clinton issued a statement praising his wife. "As an American, I am thankful," Clinton said. "As her husband, I am deeply proud." - Reuters