Gates said that despite earlier plans to recommend Pace for a second two-year term as chairman, he instead was recommending Adm. Mike Mullen, currently chief of naval operations, to take over when Pace's term expires Sept. 30.
"I think that the events of the last several months have simply created an environment in which I think there would be a confirmation process that would not be in the best interests of the country," Gates said. "I wish it were not necessary to make a decision like this. But I think it's a realistic appraisal of where we are."
Pace is the latest casualty of the Iraq War, but he was brought down by Washington politics CBS News national security correspondent David Martin reports.
Gates said he had been told by Republican and Democratic senators that a confirmation hearing for Pace would be a "backward-looking and very contentious process."
The decision had been in the works for more than a couple of weeks, CBS News White House correspondent Mark Knoller reports.
Sen. Carl Levin, D-Mich., acknowledged such advice, saying he had gathered views from a broad range of senators. "I found that the views of many senators reflected my own," and confirmation would have focused on the past four years of war, he said.
It was Levin, the head of the powerful Senate Armed Services Committee who contacted the defense secretary and told him Pace's re-appointment would be ugly, CBS News correspondent Sharyl Attkisson reports.
But on the other side of the aisle, Sen. Lindsey Graham, R-S.C., also had reservations. He told Attkisson that it became obvious that Pace's confirmation would have been used to "retry every mistake of the war at a time when we need to look forward, not backward."
A spokesman for Sen. Hillary Rodham Clinton, D-N.Y., said she, too, believed it would have been a difficult re-nomination.
"When it comes to Iraq it's not enough for President Bush to change the cast, he must also change their script," said the spokesman, Philippe Reines.
Mullen has long been eyed for a promotion, and on Friday Gates praised him as having the "vision, strategic insight and integrity to lead America's armed forces."
The announcement still seemed to surprise some senior Pentagon officials who as recently as last week were convinced there would be a second term for Pace, the first Marine to serve as chairman of the Joint Chiefs. Pace will now retire when his term is up at the end of September.
Pace's departure will put nearly an entirely new slate of leaders and military commanders in charge of the war, which is now in its fifth year and has claimed the lives of more than 3,500 U.S. troops.
And, as Martin reports, ever since Gates replaced Defense Secretary Donald Rumsfeld as Secretary of Defense last year, every single one of the top commanders running the war has been replaced.
Since then, the Democrats have shown an eagerness to challenge President Bush's handling of the conflict and support among Republicans has waned as well.
Democrats have used recent military confirmation hearings, including one earlier this week, to blast the administration's handling of the war.
Senate Majority Leader Harry Reid added that senators, "will be looking very closely at Admiral Mullen and General Cartwright's views to make sure they are committed to changing course in Iraq. Both men must be advocates for our troops, not for a failed policy."
White House spokesman Gordon Johndroe said Gates "informed the president a little over two weeks ago that consultations had not gone well (with senators) and it was his recommendation that we not go forward with the renomination of General Pace."
Gates called National Security Council Adviser Steve Hadley in Heiligendamm, Germany, Thursday night, to talk about the timing of the announcement, and on Friday Hadley informed President Bush that they were going forward. "The president had already concurred" based on the earlier talks with Gates, said Johndroe, who was traveling overseas with President Bush.