Hagel would replace Leon Panetta at the Pentagon.
However, the maverick Nebraskan could face trouble in Senate confirmation from Republicans, who question his views on Israel and Iran, said the BBC.
Obama also picked his counter-terrorism adviser John Brennan as CIA director to replace Gen. David Petraeus, who resigned in November 2012 after admitting to an affair with his biographer.
Both appointments must be confirmed by the Senate.
