The resignation of Priebus came a week after Trump recruited Scaramucci as the communications director and the subsequent resignation of White House Press Secretary Sean Spicer.
Priebus's departure makes him the shortest-serving White House chief of staff in modern history.
After frequent conversations with Kelly, Trump recently warmed up to the idea of naming Kelly chief of staff to more effectively manage personnel and offered it to him earlier this week, a senior White House official said.
Kelly, 67, a retired four-star Marine Corps general, is now secretary of the Department of Homeland Security and will assume the chief of staff post on Monday. He has been a true star of my Administration. "Secretary Kelly is an outstanding leader who has served his country honorably and I know he will do an excellent job at the White House".
Mr Priebus, as the former chairman of the Republican National Committee, is a key establishment figure.
"If Reince wants to explain he is not a leaker, let him do that", Scaramucci said on CNN's "New Day".
"I'm doing great", Priebus said. I know you will do a great job!
WASHINGTON (AP) - The tenure of Reince Priebus as White House chief of staff has ended after six months.
Trump had effusive praise for Kelly at an afternoon speech with law enforcement officers today in Brentwood, N.Y., calling the Homeland Security chief "incredible, one of our real stars". MORE: President Trump vows to "destroy' MS-13, advocates rougher treatment by police As he exited Air Force One, Trump said, "Reince is a good man. John Kelly will do a fantastic job".
Congratulations to my friend General/Secretary John Kelly for being named @WhiteHouse Chief of Staff.
NBC News said Priebus's fate was tied to the Republican congressional effort to repeal Obamacare, which failed, but there was speculation about his future after the President hired Anthony Scarmucci as his Communications Director.
A Marine, Kelly served in the military for almost five decades and served in positions including chief of Southern Command and senior assistant to the secretary of defence, CNN reported. Kushner has described him to associates as the kind of figure he'd like to see have more say in the administration. I'll get to the person who leaked that to you.
"I think it was time to hit the reset button", he said.
Priebus, a Wisconsin native, joined the administration as chief of staff after a almost six-year tenure as chairman of the RNC, the final months of which he spent in a dual role as a top adviser to Trump's campaign.