Blagojevich is the subject of a criminal inquiry and has been charged with attempting to "sell" Obama's now-vacant seat to the highest bidder.

The governor defied pressure and picked Roland Burris, the state's former attorney general, to fill the position.

Democratic senators have vowed to veto anyone appointed by Blagojevich.

The president-elect said he agreed the Senate "cannot accept" a new senator chosen by Blagojevich, adding that Blagojevich himself should resign.

Blagojevich denies wrongdoing and has rejected previous calls for his resignation.

Fine public servant

Burris, 71, became the first African-American to be elected to statewide office in Illinois when he won the 1978 election to be state comptroller.

He was state attorney general from 1991 to 1995 and made unsuccessful bids for the U.S. Senate in 1984 and Illinois governor in 1994.

"Roland Burris is a good man and a fine public servant," said Obama.

"But the Senate Democrats made it clear weeks ago that they cannot accept an appointment made by a governor who is accused of selling this very Senate seat. I agree with their decision."

Appearing with Burris to announce his choice, Blagojevich said: "Please don't allow the allegations against me to taint a good and honest man."

But Harry Reid, the leader of the Democrats in the Senate was not impressed.

"It is truly regrettable that... Governor Blagojevich would take the imprudent step of appointing someone to the United States Senate who would serve under a shadow and be plagued by questions of impropriety," said Reid.

"Anyone appointed by Governor Blagojevich cannot be an effective representative of the people of Illinois and ... will not be seated by the Democratic Caucus."

Pay-to-play deals

An internal review conducted by the Obama team concluded last week that neither the president-elect, nor his staff, had had any "inappropriate discussions" with Blagojevich about who should fill the seat.

Blagojevich has vowed to "fight the false accusations" made by what he has termed a "political lynch mob".

The Illinois state legislature has formed a committee to investigate the possibility of impeaching Blagojevich.

There have been calls from many politicians, including Obama, for the governor to step down.

Blagojevich was charged on December 9 with a number of offenses including soliciting a bribe.

The charges relate to a variety of corruption schemes in which the governor was allegedly involved, including so-called "pay to play" deals - the doling out of jobs, contracts and appointments in return for campaign contributions.

On the day of his arrest, investigators released transcripts of conversations between Blagojevich and others intercepted by court-authorized wiretaps.

In the conversations, the Democratic governor allegedly discussed offering Obama's Senate seat in return for a well-paid position at a non-profit organization or a group affiliated with trades unions, according to the affidavit.