Rice to advise Obama on national security
She replaces Tom Donilon, who is set to announce shortly he is resigning after almost three years in the post.
Rice was once seen as a top contender for the job of secretary of state, but was forced to withdraw after opposition from Republicans in Congress.
She was criticised for her remarks after an attack on diplomats in Libya.
Today, Obama nominated Samantha Power, a human rights researcher and former White House adviser, to replace Rice as the US ambassador to the United Nations.
Power, 42, left her White House adviser role earlier this year. Her nomination will require Senate approval.
She was born in Ireland and wrote a Pulitzer-Prize winning book on America’s foreign policy response to genocide.
The personnel shift comes as the US president prepares for a summit in California later this week with Chinese President Xi Jinping.
Rice, 48, dropped out of the running to be secretary of state under sustained Republican attack for her suggestion the armed assault on the US compound in the city of Benghazi, Libya in September 2012 sprang from a spontaneous anti-American protest.
That account was later proven to be incorrect.
The attack left four Americans dead, including the US ambassador to Libya, Christopher Stevens.
President Obama later nominated John Kerry for the secretary of state job, but he has always defended Rice – seen by US analysts as his close political ally.
Rice’s new post as national security adviser does not require Senate confirmation. (BBC)