John Podesta, a former chief of staff under President Bill Clinton, has spoken out against the pipeline, which would carry oil derived from tar sands in western Canada to refineries in Texas.
Podesta founded the Center for American Progress, a liberal think tank that opposes the pipeline.
Podesta's hiring cheered environmental groups, who say the $7 billion project would be a major contributor to global warming. They also worry about spills of tar sands oil, which is heavier than conventional oil.
Some Keystone supporters, including Sen. John Hoeven, R-N.D., expressed alarm, calling Podesta's inclusion in Obama's inner circle a possible death-knell for the pipeline. Backers say the project would create thousands of jobs and boost North American energy independence.
The White House says Podesta suggested that he not work on Keystone because his views are well-known.
Obama is expected to decide early next year on Keystone, which is under review at the State Department.
The White House said earlier this week that Podesta will serve a one-year post as counselor to focus on energy and climate change issues.
White House spokesman Josh Earnest said Podesta had formed his opinion on the project while outside the White House, and that officials wanted to ensure that work on Keystone reflects Obama's views.
"This is a policy process that's been in place for several years now, and having him enter that process at the very end or near the very end doesn't seem to be the best way to carry out that process and move it across the finish line,'' Earnest said.