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By ANN COMPTON and MARY BRUCE

President Obama is giving his West Wing team an extreme make-over for the second term, with the departure of top strategist David Plouffe and the naming of Deputy National Security Adviser Denis McDonough to be his next chief of staff.

Once again, the President is keeping a comfort zone around him, promoting from within. He is plucking a favorite aide from his national security team to become the new White House Chief of Staff. McDonough has been a popular figure in the Obama inner circle since the Senate days.

McDonough was widely expected to become Obama's fifth chief of staff as he replaces Jack Lew who has been nominated as Treasury Secretary.

"Welcome to the announcement of one of the worst kept secrets in Washington," Obama joked as he announced McDonough's new position in the East Room of the White House.

The president heaped praise on his longtime adviser and close friend, as McDonough stood beaming by his side.

"I have been counting on Denis for nearly a decade - since I first came to Washington, when he helped set up my Senate office," Obama said. "He was able to show me where the restrooms were and how you passed a bill… At that time, I relied on his intellect and his good judgment, and that has continued ever since."

"I cannot imagine the White House without you. Thank you for signing up for this very, very difficult job," Obama said. "I know you'll always give it to me straight, as only a friend can - telling me not only what I want to hear, but more importantly what I need to hear to make the best possible decisions on behalf of the American people."

Plouffe's departure from the tiny office next to the president's makes room for strategist Dan Pfeiffer's promotion to senior adviser. Pfeiffer is a combative planner who has been orchestrating the administration's message for the last four years.

"I thought I'd take the occasion to just embarrass somebody. Some of you may know that today is David Plouffe's last day in the White House," Obama said to laughter from the audience comprised largely of White House staff. "I had to hide this in the end of my remarks because I knew he wouldn't want me to bring it up. So we had some secret squirrel stuff going on here to avoid him thinking that we were going to talk about him."

"I can't tell you how lucky I have been to have him manage our campaign back in 2008, then join the White House during these very challenging last two years. He's built a well-deserved reputation as being a numbers genius and a pretty tough combatant when it comes to politics," he said. "Were it not for him, we would not have been as effective a White House and I probably wouldn't be here."

Pfeiffer's deputy, Jennifer Palmieri, a long-time Democratic figure, moves up to communications director. Rob Nabors was a key figure in negotiating with Congress and he's getting promoted to the top policy job in the West Wing's chief of staff office.

From the Department of Justice, Lisa Monaco will come in as the new counter-terrorism adviser, taking John Brennan's chair if he is confirmed as CIA Director.

The only other outsider coming into the West Wing is David Simas who worked on the re-election campaign. Simas will do communications. There are no announced changes in Jay Carney's press office.