Barack Obama has named his budget chief Jacob Lew as his new White House chief of staff following the resignation of Bill Daley, considered one of the US president's key advisors, after a troubled one-year tenure.

Obama told reporters at the White House on Monday that Daley had approached him about resigning last week. Obama said he first rejected the offer, asking the former businessman and US commerce secretary to think it over.

"There is no question I'm going to miss having Bill at my side at the White House," Obama said. "I plan to continue to seek Bill's counsel in the months and years to come."

Daley handed over day-to-day White House management duties in November to another Obama aide, Pete Rouse, setting the stage for his resignation two months later. He was in the job for roughly a year.

Daley took over as Obama's top aide last year with a mandate to improve relations with the corporate community and streamline White House operations.

Replacement

The choice of Lew as Daley's replacement puts a veteran staffer of the White House, Capitol Hill and state department in a critical position at a difficult time for the president.

Lew served as budget director under former president Bill Clinton, and as deputy director of the state department under US Secretary of State Hillary Clinton before taking the budget job in the current administration.

He has extensive experience on Capitol Hill, where he was a senior policy advisor to the late speaker, Tip O’Neill.

Daley had replaced Rahm Emanuel, who is now Chicago's mayor. He is the brother of Richard M Daley and the youngest son of Richard J Daley, both former Chicago mayors.

Al Jazeera's Patty Culhane, reporting from Washington, said the resignation had come as a "complete surprise" despite earlier reports that Daley's duties had been reduced.

"Barack Obama has a tight inner circle of advisors mostly from Chicago politics so one would assume that Daley would have fitted in. There have always been questions about his management style.

"More importantly, there have been big embarrassments on his watch – most of them having to do with his relationships with Congress; including the near default on the debt and being unable to work out a deal on the deficit.

"It was just a few months ago when it was subtly announced that some of his duties were being given to a staff member, so everyone in Washington were caught by surprise because chiefs of staff do not leave the White House with less than one year to the elections," our correspondent said.