Obama said there is "no one better suited" to serve in that dual role, calling Daschle "one of America's foremost health care experts."
"He knows how to reach across the aisle and bridge bipartisan divides, and he has the trust of folks from every angle of this issue," the president-elect said.
Daschle, a former South Dakota senator, said health care reform is the nation's "largest domestic policy challenge."
He said the "plight of the uninsured is unconscionable," and that reform is needed not only to make Americans healthier, but to make health care companies more competitive.
Obama, who has pledged to overhaul the American health care system, said health care reform must be "intimately woven" with the federal government's economic recovery plan.
"The time is now to solve this problem," Obama said. "This is part of the emergency."
Daschle's selection as HHS secretary has been known for some time, but Obama made it official in the news conference.
Obama said Jeanne Lambrew will serve as deputy director of the new White House Office of Health Reform, which he wants Daschle to spearhead.
Daschle was a close adviser to Obama throughout the presidential campaign. He recently wrote a book, with Lambrew's assistance, on his proposals to improve health care.
If confirmed, Daschle, 61, will oversee a department that's responsible for nearly $1 out of every $4 in federal government spending.
The Associated Press contributed to this report.