The appointment of Rahm Emanuel triggered widespread interest in Israel, the native country of his former Jewish underground fighter father.
The older Emanuel, a paediatrician born in Jerusalem, was a member of Irgun, the hard-line militant group which fought for Jewish independence until 1948.
It was described as "terrorist" at the time by Britain. Mr Emanuel's appointment could reassure Israel that Mr Obama will continue America's close alliance.
The Ynet news service quoted Michael Kotzin, a leader of the Jewish Federation of Metropolitan Chicago, as saying Mr Emanuel is a frequent attender at Israel-related events.
He co-sponsored a Bill defending Israel against a world court advisory opinion in 2004 criticising the route of the military's separation barrier for cutting deep into the West Bank, and co-sponsored another Bill congratulating Israelis and Palestinians who work together for peace.
He is credited with choreographing the famous handshake between Yasser Arafat and Yitzhak Rabin on the White House lawn in 1993.