Hillary Clinton, who had been touted as a possible running mate, said Senator Biden would be a "purposeful and dynamic vice-president".
"In naming my colleague and friend Senator Joe Biden to be the vice presidential nominee, Senator Obama has continued in the best traditions for the vice-presidency by selecting an exceptionally strong, experienced leader and devoted public servant," she said in a statement.
The McCain camp called the choice of Mr Biden an admission by Barack Obama that he was not ready to be president.
"Biden has denounced Barack Obama's poor foreign policy judgement and has strongly argued in his own words what Americans are quickly realising - that Barack Obama is not ready to be president," McCain campaign spokesman Ben Porritt said in a statement.
John McCain has reportedly not yet settled on a running mate.
Minnesota Governor Tim Pawlenty and former Massachusetts governor Mitt Romney are reported to be under serious consideration for the role.
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