* Faces Senate battle on two fronts
* Hagel faces questions on Israel, gays
* Brennan's previous CIA tenure under scrutiny
* Moves fill out reshuffled national security team
By Steve Holland and Roberta Rampton
WASHINGTON, Jan 7 (Reuters) - President Barack Obama on Monday nominated former Republican Senator Chuck Hagel as his next defense secretary and counterterrorism adviser John Brennan to head the CIA, potentially setting up at least one Senate confirmation battle and establishing a tough tone to start his second term.
Obama moved ahead with the picks despite concerns raised by senators on both sides of the aisle about them. Hagel has made controversial comments about Israel and gays while Brennan faces questions over his views as a CIA official in the Bush administration on the use of so-called enhanced interrogation techniques, widely considered torture, on terrorism suspects.
"I hope that the Senate will act on these confirmations promptly. When it comes to national security, we don't like to leave a lot of gaps between the time that one set of leaders transitions out and another transitions in. So we need to get moving quickly on this," Obama said in announcing them.
The addition of Hagel and Brennan, along with Democratic Senator John Kerry as nominee for secretary of state, rounds out Obama's national security team as he faces daunting challenges of winding down the war in Afghanistan, dealing with the Iranian nuclear standoff and curbing military spending.
Hagel, 66, appeared to face the tougher fight for confirmation in the Democratic-controlled Senate, in spite of Obama's warm words of praise for the former Nebraska lawmaker as someone "who bears the scars and the shrapnel from the battles that he fought" in the Vietnam War.
Some Democratic senators offered only tepid support for Hagel and many Republicans expressed deep concerns. The pro-Israel lobby in Washington, which Hagel once criticized, was gearing up to fight him.
"Chuck Hagel, as a former colleague and a patriot with a decorated service record, has earned the right to nothing less than a full and fair process in the Senate. I look forward to fully studying his record and exploring his views," Democratic Senator Charles Schumer of New York said.
In an interview published as his nomination was being announced, Hagel told the Lincoln Journal Star, a Nebraska newspaper, that critics had "completely distorted" his record and said there was "not one shred of evidence that I'm anti-Israeli."
He expressed "unequivocal, total support for Israel" and backed tough sanctions against Iran over its nuclear program.
Brennan, on the other hand, appeared to be generating less outright opposition, suggesting a possible easier path to confirmation. He withdrew his name from consideration for the top CIA post in 2008 in the face of criticism over comments suggesting the harsh interrogation methods produced useful information from detainees.
There is no evidence Brennan was directly involved in the Bush-era program, which included techniques such as waterboarding, a form of simulated drowning, and sleep deprivation.
As White House counterterrorism chief, he was a key player in the secret operation that led to the death of Osama bin Laden in 2011, and he has been at the heart of policies dealing with drone strikes in Yemen, among other issues.
'ANOTHER POLITICAL FIGHT'
Brennan, 57, would replace disgraced retired General David Petraeus, who got entangled in a sex scandal as CIA director and resigned in November after admitting to an affair with his biographer.
"Clearly, Mr. Brennan has the qualifications and expertise to be the next CIA director," said Democratic Senator Dianne Feinstein, chairwoman of the Senate Intelligence Committee, which will consider Brennan's nomination. "He has longstanding knowledge of the operations of this critical agency and also the strength to see that it follows the law. I believe he will be a strong and positive director."
Obama's decision to go ahead with the picks made clear he was ready to fight for his personnel and eager to put behind him a flap over his preferred choice for secretary of state, U.S. Ambassador to the United Nations Susan Rice. Rice pulled out of consideration in the face of criticism over her descriptions of the deadly attacks on the U.S. diplomatic mission in Benghazi, Libya.
Mindful of the concerns about both Hagel and Brennan on Capitol Hill, Obama spoke at length about each in a White House ceremony, then turned over the microphone to outgoing Defense Secretary Leon Panetta and acting CIA Director Mike Morell to provide testimonials about their chosen replacements.
Panetta, heading home after decades of public service, most recently as defense secretary and CIA director, expressed lighthearted exasperation with the partisan divide in Washington, saying he would go back to his California walnut farm where he would be "dealing with a different set of nuts."
While senators are normally inclined to give the benefit of the doubt to someone from their ranks, this has not been the case with Hagel, a maverick former senator.
As Hagel's name was floated for the post in recent weeks, many Republicans and some Democrats reacted with alarm, expressing deep concerns about past statements the moderate Republican has made. He has offered controversial views on key U.S. ally Israel, once complaining about the power of "the Jewish lobby" in Washington and urging direct talks with Iran over its nuclear ambitions.
Past remarks seen as disparaging to gays have drawn the ire of gay rights groups. A group called the Log Cabin Republicans published a full-page ad in The Washington Post that attacked, for example, Hagel's 1998 opposition to an "openly, aggressively gay man" to serve as a U.S. ambassador. He has since apologized for the statement.
Republican Senator Rob Portman of Ohio said he was surprised and disappointed that Obama had moved ahead with the Hagel nomination.
"I don't understand why the administration is looking to pick yet another political fight instead of working with Congress to solve some of the very real problems we face as a country," he said.