McDonough’s grandparents emigrated from Galway while his mother’s parents were O’Mahonys from Cork.
Obama has tapped a trusted loyalist to help drive his second-term agenda as he unveils a major overhaul of senior staff.
McDonough was widely tipped to fill the vacancy created by Jack Lew’s nomination as treasury secretary.
McDonough, a deputy national security adviser, will take on what is a mostly behind-the-scenes job, but still considered one of Washington’s most influential.
The chief of staff acts as Oval Office gatekeeper and a key co-ordinator of domestic and foreign policymaking.
Obama’s choice of McDonough follows a pattern of picking close confidants and allies as he shuffles his inner circle for his second-term.
McDonough, 43, started with Obama when he was a first-time US senator from Illinois and just beginning his rapid ascent on the national political scene.
McDonough, whose expertise is mostly in foreign policy, worked on Obama’s 2008 presidential campaign and became a senior aide at the National Security Council when the president took office.
Obama recently announced counter-terrorism adviser John Brennan, the son of immigrants from Roscommon, to lead the CIA.
Meanwhile, Dublin-born Obama official Samantha Power could be the next US ambassador to the UN, according to the Washington Post.