Kelly had been serving as secretary of Homeland Security in the Trump administration.
"He is a Great American.... and a Great Leader. John has also done a spectacular job at Homeland Security. He has been a true star of my Administration," Trump said of Kelly in a series of tweets Friday.
I am pleased to inform you that I have just named General/Secretary John F Kelly as White House Chief of Staff. He is a Great American....— Donald J. Trump (@realDonaldTrump) July 28, 2017
...and a Great Leader. John has also done a spectacular job at Homeland Security. He has been a true star of my Administration— Donald J. Trump (@realDonaldTrump) July 28, 2017
I would like to thank Reince Priebus for his service and dedication to his country. We accomplished a lot together and I am proud of him!— Donald J. Trump (@realDonaldTrump) July 28, 2017
"I would like to thank Reince Priebus for his service and dedication to his country. We accomplished a lot together and I am proud of him!" Trump tweeted.
In a statement, Kelly noted that he has "served my country for more than 45 years" -- first as a Marine and then as Homeland Security chief.
"I am honored to be asked to serve as the Chief of Staff to the President of the United States," added Kelly, who will remain the head of DHS until Monday.
Hours after Trump's announcement, Priebus gave an interview to CNN and said he had decided to resign Thursday.
"This is about the president, it's about moving his agenda forward," Priebus told Wolf Blitzer. "I think he made a smart decision with Gen. Kelly. ... I talked to him, I talked to the president. We'll be working on a transition for a couple of weeks."
Priebus's ouster came amid smoldering tensions in the White House ignited by another staff shakeup in the communications department.
Trump's naming of former investment fund manager Anthony Scaramucci triggered the resignation of former Press Secretary Sean Spicer, who left his post almost immediately after Scaramucci was named as Trump's new communications director.
MORE: Sean Spicer resigns as White House press secretary
Some saw Spicer's departure and a newly minted feud with Scaramucci as a harbinger of the end of Reince Priebus's tenure as Trump's chief of staff.
"I don't know if this is repairable or not, that will be up to the president," Scaramucci said in a CNN interview on Thursday.
MORE: Scaramucci tirades ignite smoldering White House tensions
But Trump revealed no hint of ire toward Priebus in his tweets, or in brief remarks to ABC News as he deplaned from a trip to speak to law enforcement and crime victims' families in New York about the gang MS-13 minutes after the social media posts.
MORE: President Trump vows to 'destroy' MS-13, advocates rougher treatment by police
As he exited Air Force One, Trump said, "Reince is a good man. John Kelly will do a fantastic job. General Kelly has been a star. Done an incredible job thus far. Great, Great American respected by everybody. He's done a great, great job."
"Reince Priebus is a good man," Trump repeated.
The outgoing chief of staff is a close friend of House Speaker Paul Ryan, a fellow Wisconsinite.
"He has achieved so much, and has done it with class," Ryan said.