The President-elect will unveil his national security team today, gambling that appointing the former first lady as foreign policy chief will restore some heft to American diplomacy.
To prevent the announcement getting bogged down in the Clinton soap opera, aides to Mr Obama revealed details of the agreement with Mr Clinton, whose post-White House business and philanthropic dealings threaten to expose a thicket of conflicts of interest.
The vetting of Mrs Clinton for the State Department job turned into a detailed examination of the funding of Mr Clinton's charitable foundation and of his Clinton Global Initiative (CGI), which works to find solutions to Aids, climate change and poverty.
The former president will reveal the names of 200,000 donors to the two institutions and publish details of future contributions. US law does not require such disclosures but Mr Clinton's refusal to do so was exploited by opponents of his wife's bid for the presidency, including Mr Obama, who said during the primaries that the Clintons were "veterans of non-disclosure".
With Mrs Clinton at the State department, her husband's business dealings had threatened to be an even more serious embarrassment.
Mr Clinton's projects lean heavily on contacts from his White House days, with donors including at least four Middle Eastern governments.
Even as his wife was first meeting the Obama transition team, Mr Clinton drew attention, talking up her experience for the job in a lucrative speech at a bank-sponsored economic forum in Kuwait.
So it was that the Obama team and the Clintons entered into a finicky legal negotiation more akin to a corporate merger than a straightforward political appointment. Over almost three weeks, Mr Clinton agreed to turn over all the financial details of his foundation and business dealings and entered into a nine-point plan that limits his ability to embarrass his wife and – more importantly – the White House.
Future speaking engagements will have to be vetted by the State department and, if necessary, by the White House. Mr Clinton made more than $10m (£6.5m) last year from such appearances.
The CGI will also be legally separated from the former president's charitable foundation, so that its activities lobbying foreign governments and proposing international policy co-ordination are held at arm's length from Mr Clinton himself.
Future meetings held by the CGI will have to be based in the US, meaning that this week's symposium for Asian leaders in Hong Kong will likely be the last of its kind for the duration of Mrs Clinton's stint in the cabinet.
Mrs Clinton will be the most recognisable identity among a "team of rivals" that Mr Obama is assembling for his administration.
Today's announcements follow a well-received string of announcements made before Thanksgiving on his economic team, which pulled high profile economists and regulators into service to tackle the financial crisis.
For national security, Mr Obama faces the challenge of repairing relations with the world after the administration of George Bush, while reassuring the US public that the country can stand up to the threats of global terrorism, wars in Afghanistan and Iraq and the emerging threats of a nuclear Iran. Mrs Clinton's in-tray was already stacked high before the attacks in Mumbai threatened to ratchet up tension between India and Pakistan.
Amid concerns that Mrs Clinton could use the State Department to develop an alternative power centre to the White House, in case there were a political opening for a presidential run in 2012, the Obama transition team will have worked to finesse the remaining differences between the two on foreign policy. These were most starkly on display during the primaries, when Mrs Clinton accused her younger rival of being naive in promising to meet unconditionally with the leaders of Iran and other countries that were not allies of the US.
Mr Obama has also been able to persuade Robert Gates, the Bush administration's Defence Secretary, to stay in his post to oversee the shift of troops from Iraq to Afghanistan. And he will announce that James Jones, a retired four-star general with 40 years experience in the Marines, will be the national security adviser to the White House. In doing so, he elevates a man with a reputation as a foreign policy moderate and an adroit mediator.
The President-elect also plans to name his picks for UN ambassador, Attorney General and Homeland Security Secretary this morning, once again picking candidates of the political centre who command respect on both sides of the political divide.
Mr Obama has settled on Susan Rice, his campaign foreign policy adviser, for the UN post. For Attorney General, the pick is Eric Holder, who helped run Obama's vice presidential search. The Arizona Governor Janet Napolitano will run the Homeland Security department.
Clinton's millions: Who gives what
*Few donors to the William J Clinton Foundation and the Clinton Global Initiative have been disclosed.
* "Trustees" who have donated at least $1m to the foundation include the Saudi royal family, the governments of Dubai, Kuwait, Qatar, Brunei and Taiwan, Saudi businessmen, the Deputy Prime Minister of Lebanon, Issam Fares, the film director Steven Spielberg and the heir to the Wal-Mart retail empire Alice Walton.
*Sir Tom Hunter, the Scottish businessman, donates $10m a year for economic development in Africa.
* "Humanitarians" who have given between $100,000 and $500,000 include the King of Morocco, Mohammed VI, and religious groups.
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