While his new team may be a bit more centrist - some war opponents might even say hawkish - than many Obama supporters might prefer, he said the withdrawal timetable he emphasized in the presidential campaign is still "the right time frame."
Clinton, as secretary of state, and Gates, remaining as defense secretary, will be the most prominent faces - besides Obama's own - of the new administration's effort to revamp U.S. policy abroad.
At a Chicago news conference, Obama also tapped top advisers Eric Holder as attorney general and Susan Rice as ambassador to the United Nations. He named Arizona Gov. Janet Napolitano to be homeland security secretary and retired Marine Gen. James Jones as White House national security adviser.
The choices had been telegraphed days earlier but were remarkable all the same - still another major turn in Clinton's extraordinary career, a show of faith in Gates and action to support Obama's frequent talk of desiring robust debate among seasoned, opinionated people in his inner circle.
Denouncing White House "group think," Obama signaled a break from President Bush's tendency toward an insular management style and go-with-the-gut diplomacy.
"The time has come for a new beginning," said Obama, flanked by flags on a stage with Vice President-elect Joe Biden and his six newest appointees. While Gates will stay at the Pentagon, Obama said the military's new mission will be "responsibly ending the war in Iraq through a successful transition to Iraqi control."
He said a newly completed agreement between Iraq and the Bush administration covering U.S. troops signals "a transition period in which our mission is changing." He added: "It indicates we are now on a glide path to reduce our forces in Iraq."
Obama has now selected half his Cabinet, including the high-profile jobs at State, Defense, Justice and Treasury. A week ago, he named his economic team, led by Timothy Geithner as treasury secretary. And soon he plans to announce New Mexico Gov.
Bill Richardson as commerce secretary and former Senate Majority Leader Tom Daschle as health and human services secretary.
Obama's picks suggest he is mindful of his own relative inexperience; most of the appointees have decades more experience in government than he does as a former one-term Illinois senator.
The selections also reflect his long-voiced desire to invite divergent viewpoints to chart the best course for the country.
"I assembled this team because I'm a strong believer in strong personalities and strong opinions," he said. "I think that's how the best decisions are made. ... So I'm going to be welcoming a vigorous debate inside the White House."
"But understand I will be setting policy as president," he added. He said he will be responsible for "the vision that this team carries out, and I expect them to implement that vision once decisions are made."
Quoting Harry S. Truman, Obama said: "The buck will stop with me."
"The time has come for a new beginning, a new dawn of American leadership to overcome the challenges of the 21st century," Obama said.
Without naming Bush or directly referring to what administration critics see as America's tarnished world image over the past eight years, Obama called for a new strategy for dealing with global issues.
"We're going to have to bring the full force of our power, not only military but also diplomatic, economic, and political, to deal with those threats not only to keep America safe but also to ensure that peace and prosperity will exist around the world," he said.
Referring to his security team, Obama said: "They share my pragmatism about the use of power and my sense of purpose about America's role as a leader in the world."
Asked by reporters about his choice of Clinton, who traded barbs with him and questioned his readiness for the presidency during the campaign, he praised her and shrugged off any suggestions of future problems.
He said of the New York senator, "She possesses an extraordinary intelligence and toughness, and a remarkable work ethic. ... She is an American of tremendous stature who will have my complete confidence, who knows many of the world's leaders, who will command respect in every capital and who will clearly have the ability to advance our interests around the world."
The former first lady repaid the compliment: "I am proud to join you ... and may God bless you and our great country."
Likewise, Gates said he was "honored to serve President-elect Obama."
He said he was "mindful that we are engaged in two wars and face other serious challenges at home and around the world."
"I must do my duty as they do theirs," he said of the men and women in uniform in Iraq, Afghanistan and elsewhere. "How could I do otherwise?"
At the news conference, Obama expressed sympathy for the victims of the terror attacks in Mumbai but twice declined to say whether the Indian government would be justified in pursuing terrorists in next-door Pakistan.
"This is one of those times when I have to reiterate there is one president at a time," he said. "We're going to be engaged in some very delicate diplomacy in the next days and weeks, and I think it would be very inappropriate of me to comment."
Obama had drawn criticism during the campaign - including from Clinton - when he said the United States would be justified in pursuing al-Qaida terrorists in Pakistan if it had "actionable intelligence."
Clinton will give up her seat as a senator from New York to join the Cabinet. Her appointment was preceded by lengthy negotiations involving her husband, the former president, whose international business connections posed potential conflicts of interests.
Napolitano, too, must resign her current job as a border state governor. She was among the earliest Obama supporters, when Clinton seemed the likely Democratic nominee.
Gates' appointment fulfilled a campaign promise by Obama, the naming of a Republican to his Cabinet.
Holder, a former Justice Department official in the Clinton administration, led Obama's vice presidential search, while Rice was his top foreign policy adviser. Jones, meanwhile, advised both Obama and Republican presidential nominee John McCain during the campaign on national security issues. Last year he led a commission that advised Congress on progress in training Iraqi security forces.
Clinton, Holder, Napolitano and Rice require Senate confirmation. Jones, as a White House official, does not. Nor does Gates, already confirmed to his post.