"I am thrilled that she'll be back at my side leading my national security team in my second term," Obama said Wednesday of his longtime confidante in a Rose Garden announcement.
"Susan is the consummate public servant — a patriot who puts her country first."
The 48-year-old Rice, a Rhodes scholar whose Canadian husband is a former CBC producer, is replacing current national security adviser Thomas Donilon, whose departure from the post had been expected some time this year.
Donilon, 55, played a significant role in the Obama administration's orders to raid Osama bin Laden's Pakistani compound in 2011, as well as the White House's strategic shift of foreign policy focus to Asia.
Rice's name has been at the top of list of potential Donilon replacements, especially after she removed herself from contention to replace Hillary Clinton as secretary of state earlier this year in the heat of a blistering Republican campaign against her over Benghazi.
Obama has always been a staunch Rice loyalist, sticking by her when Republicans excoriated the UN envoy for her public comments on the deadly attack on the U.S. consulate last Sept. 11 in the Libyan city.
"Mr. President, I am deeply honoured and humbled to serve our country as your national security adviser," Rice said in the Rose Garden on Wednesday. She added she was also "deeply grateful for your enduring confidence in me."
Not surprisingly, Republican reaction to the announcement was grim.
Many of the same Republicans who vowed to block Rice's Secretary of State nomination because of Benghazi criticized Obama's choice on Wednesday. Rice's new post doesn't require a Senate confirmation hearing.
"This is a defiant gesture by the president saying to the Republicans: I know you think she lied, she misled the country, but who cares — I'm doing it," longtime Republican strategist Karl Rove said on Fox News.
The appointment is further evidence Obama plans to "get more in the face of Republicans," he added.
Two of Obama's fiercest congressional critics, Republicans Rand Paul and Jason Chaffetz, also maligned the decision.
"I can't imagine ... that we would be keeping Ambassador Rice in any significant position, much less promoting her to an important position," said Paul, a Kentucky senator. "I really question the president's judgment in promoting someone who was complicit in misleading the American public."
Chaffetz, a Utah congressman, agreed.
"I am sure she is a nice person, but she lacks judgment. She claims to have read the daily intelligence brief, and anyone who was following what was happening in Libya would have known terrorism was likely a factor in the incident in Benghazi," Chaffetz told The Daily Beast.
During talk show appearances five days after the Benghazi violence, Rice said the attacks on the consulate were likely spontaneous protests against an anti-Muslim, American-produced video. Her comments were based on talking points from intelligence agencies that were later proven false.
Rice has risen through Democratic ranks over the years to counsel politicians who have included Bill Clinton, Michael Dukakis and John Kerry, who's now secretary of state.
She has an impressive pedigree — her father was the first black governor of the Federal Reserve Board, her mother a renowned education scholar — but Rice’s legendary abrasiveness prompted misgivings about her suitability for the Secretary of State job from both the left and right earlier this year.
Among other apparent transgressions, Rice reportedly once gave respected diplomat Richard Holbrooke the middle finger when she worked in the Bill Clinton White House.
Under Bill Clinton, Rice had a critical say in several foreign policy decisions — some of them controversial. In the 1990s, she advised against accepting Sudan's help in capturing Osama bin Laden.
She later expressed regret over the Clinton administration's failure to prevent massive genocide in Rwanda in 1994. Canada's Romeo Dallaire, head of the overwhelmed UN peacekeeping forces at the time, had urged the international community to take action.
Rice married Canadian Ian Cameron, now a producer for ABC, in 1992 in Washington. They met as students at Stanford University and have two children.
Obama has been criticized for failing to appoint enough women to his cabinet this term, but his pick to replace Rice at the UN is Samantha Power, an Irish-American human rights expert and one-time National Security Council official.
That makes for two women in key roles in Obama's second term, although Power's nomination will have to be confirmed by the U.S. Senate.
Power may face some opposition during those hearings — she resigned from Obama's 2008 presidential campaign after calling Hillary Clinton a "monster" in an interview, a misstep that could raise questions about her discretion and partisanship.
Both Rice and Power are known for their humanitarian interventionist viewpoints; they were viewed as two key advocates for military action in Libya in 2011.
That's led to speculation both women may push Obama for greater American involvement in Syria, where a bloody 27-month civil war is showing no signs of easing.