"Deese will be part of the core White House strategic team, focusing specifically on bridging the intersection of policy, politics and legislative strategy going forward," a White House official said.
In recent months, Deese led the policymaking process around the State of the Union address with Obama and his top advisers. He's expected to play a significant role in upcoming budget battles with Congress over raising the debt ceiling and funding the government.
But his promotion suggests that the president, who has seen his poll numbers rebound in recent weeks, is not likely to look outside the White House to inject new life in the final two years of his presidency.
Deese will take over the climate and energy portfolio that Podesta has championed during his time in the administration.
That includes coordinating the administration's work to reach an international climate accord in Paris later this year, as well as work on conversation and land management. And he'll serve as the White House's primary liaison to environmental groups.
As part of the transition, Deese will travel later this week with the president and Podesta to India to work on environmental issues. Secretary of State John Kerry will not attend.
Deputy national security spokesman Ben Rhodes said Wednesday the India talks would be central to effort to strike a broader international agreement in Paris.
"We are looking to increase our cooperation in pursuit of developing clean energy, but also pursuing a successful and ambitious round of climate negotiations this year, leading in to Paris," Rhodes said. "So, we'll have an ability to continue our work with India and discussing ways that we can cooperate in pursuit of that global effort to combat climate change."
White House chief of staff Denis McDonough told The Associated Press, which first reported news of the promotion, that Deese began to emerge as a candidate to replace Podesta last summer.
"Brian is kind of the whole package — policy, strategy, insight to legislative and public affairs matters — and that's what the president was looking for," McDonough told the wire service.
Podesta, who served as chief of staff to former President Clinton, said before joining the administration in late 2012 that he did not intend to stay more than a year. In recent weeks, he's clarified his intention to leave after the State of the Union address, and he's widely expected to take a role as a top figure in Hillary Clinton's presidential campaign.