McClellan, 43, has been with the Bush administration from the start, and he has been at the Centers for Medicare and Medicaid Services since March 2004.
"My kids don't remember me in a job where I got home regularly for dinner. It's just time," said McClellan, the father of 7-year-old twin girls. "We've gotten a lot accomplished and I'm very confident with the track the agency is on."
Also Tuesday, President Bush picked Mary Peters to be the nation's new transportation secretary, a Cabinet position that took on more prominence after the Sept. 11 terrorist attacks.
If confirmed by the Senate, Peters, a former federal highway administrator who had explored a run for governor of Arizona, will succeed Norman Mineta, who stepped down in July.
Noting Mineta's long tenure in the post, Peters said that if she's confirmed, she would feel a bit like Ginger Rogers dancing with Fred Astaire. "I think I'm going to be dancing backward in high heels a little bit," she said.
Sen. Charles Grassley, R-Iowa, said McClellan's task of overseeing the Medicare drug benefit's implementation was the equivalent of a Mars landing.
Under the program, elderly beneficiaries enroll in plans administered by private insurers. Seniors had dozens of plans to pick from, and many participants were left confused and frustrated. Early on, states had to step in to ensure their poorest residents could continue getting medicine.
"Of course, he should get credit for a lot of behind-the-scenes work to make sure millions of Medicare beneficiaries get their prescriptions filled smoothly," Grassley said.
President Bush called McClellan a trusted adviser.
"He played an instrumental role in transforming the nation's health care system, and his efforts will continue to make a difference for generations," Bush said.