WASHINGTON - A Sabbath-observant Jew was named on Monday as President Barack Obama's chief of staff, one of the most pivotal jobs in U.S. politics.

Jacob (Jack) Lew, who last served as the White House budget director, will be replacing William Daley, who resigned just one year into the job. The change will take effect at the end of the month.

Open gallery view U.S. President Barack Obama, flanked by outgoing White House Chief of Staff William Daley, right, and his replacement, current Budget Director Jacob Lew, announcing the changes. Credit: AP

Daley's predecessor was another prominent Jewish political figure, Rahm Emanuel, who is now mayor of Chicago.

Over the past three years, Lew, whose son studied in a yeshiva in Israel, has developed a close working relationship with Israeli Ambassador to the United States Michael Oren, and has met several times with Deputy Foreign Minister Danny Ayalon and Finance Minister Yuval Steinitz.

Lew, who served as budget director under President Bill Clinton and was a deputy to Secretary of State Hillary Clinton before going back to the budget job under Obama, has strong relationships with lawmakers. He was instrumental in negotiating the debt ceiling talks with Republicans last summer.

In November Daley handed over day-to-day White House management duties to another Obama aide, Pete Rouse, setting the stage for his resignation two months later.

Yet Daley was not expected to leave the job and return to Chicago, where his family has long held a political dynasty, until after the November presidential election.

Daley had been hinting at his intentions to resign for more than two months, saying he wanted to spend more time with his family. But Obama's aides said Daley's resignation came as a surprise to the president, who urged him to reconsider. Daley said he plans on assisting Obama in the election campaign.

A former businessman and U.S. commerce secretary, 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. Relations with business remained rocky, however, and lawmakers complained that his outreach to Capitol Hill was minimal.

Obama chose Daley to be his White House chief of staff in January 2011, but the former banker and veteran political fighter Daley has had a somewhat rocky tenure.

At the least, the job has not seemed like the best fit.

Daley served as commerce secretary under Bill Clinton and ran Al Gore's 2000 presidential campaign. He is the brother of recently retired Chicago Mayor Richard M. Daley and the youngest son of legendary Chicago Mayor Richard J. Daley.