President Obama announced Friday that his brash and hard-charging chief of staff Rahm Emanuel would resign effective immediately, marking the most significant departure to date from the president's inner circle.

Emanuel was beckoned away from Washington by an open seat in the Chicago mayoral race and is expected to soon launch a campaign for that post, one he's described as his dream job. A packed crowd of top-level officials gathered in the East Room to watch Obama pass the torch Friday from Emanuel to his selected replacement, senior adviser Pete Rouse.

The president, calling the occasion "bittersweet," credited Emanuel with the passage of landmark legislation during his administration and said he would be "extraordinarily well-qualified" for his next endeavor...