| A judge issued an injunction against Lula's appointment shortly after he was sworn in |
Lula is under investigation in connection with a corruption scandal. The government has appealed against the decision.
Legal battle
Prosecutors filed charges against Lula last week accusing him of money laundering and fraud, which he has denied.Brazilians get that sinking feeling as crisis deepens
Brazil tumbling like 'House of Cards'
Lula: Most hated and loved man in Brazil
Why is Lula caught up in scandal?
Lula's nomination as chief of staff has divided Brazilians.
Some said it was a move to shield him from prosecution while others welcomed his return to active politics. Ahead of his swearing-in ceremony, groups of supporters and opponents of the government clashed outside the presidential palace.
The ceremony itself was interrupted by a protester who cried "Shame!". The protester was drowned out by supporters of the governing Workers' Party, who shouted pro-government slogans and Lula's name.
During the ceremony, President Rousseff praised Lula, who she said was "not just a great politician, but a great friend and comrade of many battles". "We've always stood side by side," she said.
A visibly angry Ms Rousseff then criticised federal Judge Sergio Moro, who is leading the investigation into a massive corruption scandal at state-oil giant Petrobras.
On Wednesday, Judge Moro made public a taped phone conversation between President Rousseff and Lula which has been interpreted by some to show that Lula was given the post of chief of staff to shield him from prosecution.
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