The move shields the former president from possible prosecution by a federal judge investigating a massive corruption scandal named Operation Car Wash.
Luiz Inacio Lula da Silva’s appointment sparked protests in several Brazilian cities by those angry at the decision.
However, President Dilma Rousseff said that protecting her mentor and predecessor from prosecution was not the motivation for the appointment.
“Lula’s arrival in my government strengthens it and there are people who don’t want it to be stronger,” she said.
Under Brazilian law, cabinet members can only be tried by the Supreme Court.
On March 4, Luiz Inacio Lula da Silva was briefly detained and questioned over allegations of money laundering connected to Operation Car Wash, a massive investigation into corruption at the state oil giant, Petrobras.
The former president denies the allegations and says they are aimed at preventing him from running for president again in 2018.
In a taped telephone conversation released by the judge overseeing the investigation, Dilma Rousseff offered to send Luiz Inacio Lula da Silva a copy of his appointment “in case of necessity” – interpreted by some as meaning in case he needed it to avoid arrest.
Hours after the announcement of his appointment, protesters gathered outside the Presidential Palace in Brasilia and in at least three other cities.
In Congress, opposition politicians gathered around a microphone during a chaotic session and chanted “resignation”.
Dilma Rousseff says the appointment is due to Luiz Inacio Lula da Silva being a “skilful political negotiator” and experienced leader who will help kick off economic recovery.
During his time in office, the Brazilian economy experienced unprecedented economic growth and wealth redistribution.
“I believe [former] President Lula, who was in charge of the country for eight years, cannot have his reputation destroyed in this manner,” added Dilma Rousseff.
Luiz Inacio Lula da Silva and other ministers appointed on March 16 are expected to be sworn in at 10:00 local time on March 17.
As chief of staff, Luiz Inacio Lula da Silva is expected to lead the fight against moves in Congress to impeach President Dilma Rousseff over allegations she manipulated Brazil’s account books to hide a growing deficit.
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