"I am proud that KT has once again decided to serve our country and join my national security team," Xinhua news agency quoted Trump as saying in a statement.
"I'm honoured and humbled that he has asked me to be part of his team," McFarland said in response.
Michael Flynn, who had been named National Security Adviser, tweeted: "So proud and honoured to have KT McFarland as part of our National Security team. She will help us."
McFarland, 65, is known for her hawkish views in foreign policy. She has served in various national security posts under Nixon, Ford and Reagan administrations and is now a national security commentator.