Hillary Clinton has emerged as a leading candidate to be the next Secretary of State after it was confirmed yesterday that she had held a secret meeting with Barack Obama in Chicago this week.

Two officials in the president-elect's transition team, apparently operating in concert, have disclosed that Mr Obama's opponent in this year's fiercely-contested Democratic primary is under serious consideration for America's top diplomatic post.

A close confidant of Mrs Clinton told The Times: "This was a very deliberate leak, perhaps to test the waters and see what the reaction is. But if they don't give it to her now they will have humiliated her again – and that would be a gigantic political mistake."

Speculation about her role increased after she was seen boarding a flight on Thursday to Chicago, Mr Obama's home city. Although Mrs Clinton's spokesman would only say she was travelling on "personal business", sources yesterday acknowledged they had held behind-closed-doors talks.

Mr Obama has spoken about his desire to reach out to political opponents, including Republicans, as he forms his administration. He has cited Doris Kearns Goodwin's book "Team of Rivals” as a key text for him. He says the biography of Abraham Lincoln showed how he brought in former enemies and "was confident enough to be willing to have these dissenting voices".

Yesterday, the President-elect announced he would hold talks on Monday in Chicago with John McCain, the Republican nominee in last week's election who has promised to help Mr Obama find bi-partisan solutions to the challenges facing America.

Previously John Kerry had been strongly linked to the post of Secretary of State, having been among those who gave early backing to Mr Obama in the primary campaign. But well-placed sources have indicated that the Democratic nominee in 2004 is no longer favourite for the job.

There are also suggestions that Joe Biden, the vice president-elect, is playing a key role in the choice not least because he knows both candidates well from their time together in the Senate.

He has often expressed his admiration for Mrs Clinton's depth of knowledge and experience on foreign policy. Mr Kerry, though regarded by some as a difficult colleague, would be in line to inherit Mr Biden's chairmanship of the Senate Foreign Relations Committee.

Michelle Obama, who was reported to be strongly opposed to Mrs Clinton being her husband's vice-presidential running-mate, this week had a half hour conversation with the former First Lady about bringing up children in the White House. By all accounts this was a warm and friendly exchange which did much to remove any remaining taint of bitterness between the two women.

In their contest for the Democratic nomination Mrs Clinton repeatedly questioned Mr Obama's credentials and experience to be commander-in-chief. But since conceding defeat in June, she campaigned effectively for him even after calls for her to be chosen as his running mate on a so-called "dream ticket" were not heeded.

Her confidant suggested that the role of Secretary of State, with its clearly defined parameters, might be a "better job" than that of vice-president. Bringing Mrs Clinton inside the tent would have the added advantage of removing her from the battlefield should Mr Obama's administration, constrained by economic crisis, begin to go back on campaign promises such as introducing universal health care coverage.

There are, however, outstanding issues that would have to be resolved. Some of Mrs Clinton's supporters are known to be unhappy that Mr Obama has not done more to help her pay off a multi-million dollar campaign debt. And his team would also be worried that Bill Clinton, who has had many tangled foreign business dealings, could yet embarrass an administration that is promising transparency.

Earlier this week, Mrs Clinton was asked if she would consider taking a post in the Obama administration. "I want to be a good partner and I want to do everything I can to make sure his agenda is going to be successful."

A number of former staff members from Mr Clinton's administration have already been appointed to key roles in Mr Obama's transition team. They include Rahm Emanuel, who will become chief of staff in the White House, whose Israeli heritage has already delighted a Jewish lobby that had previously harboured suspicions towards the president-elect.

His father, Benjamin Emanuel, has attracted controversy for saying: "Obviously he’ll influence the President to be pro-Israel. Why wouldn’t he? What is he, an Arab? He’s not going to be mopping floors at the White House." He later apologised to the Arab-American Anti-Discrimination Committee on behalf of his family.

Appearing at a transit conference in Albany yesterday, Ms Clinton avoided commenting on the speculation about her possible appointment by Mr Obama, adding "I'm going to respect his process."

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