Hagel reiterated Washington's appeal for dialogue amid ongoing bloodshed in Egypt but acknowledged that the United States could not dictate events there.
"The interim government of Egypt must get back to an inclusive approach to reconciliation in Egypt," Hagel said during a joint news conference at the Pentagon with his Chinese counterpart, General Chang Wanquan.
Hagel has had more than 15 phone conversations with Egypt's army chief, General Abdel Fattah al-Sisi, since the officer led a coup against president Mohamed Morsi.
Due to the violence in Egypt, Obama last week announced the United States had cancelled a joint military exercise with Egypt scheduled for next month.
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But he has chosen to maintain the flow of US military aid, which comes to USD 1.3 billion a year.
Asked why the United States did not cut off all aid as some lawmakers have urged or suspend the delivery of Apache helicopters, Hagel said Washington had "serious interests" in the region, including efforts to secure an Israeli-Palestinian peace.
But he said Egypt was a sovereign country and that Washington had only a modest ability to shape the political situation.
"Our ability to influence the outcome in Egypt is limited," Hagel said. "It's up to the Egyptian people. And they are a large, great, sovereign nation."
The Pentagon chief also said the US government was working closely with Egyptian security forces to ensure the safety of its diplomats and other Americans in Egypt.
"Yes, we are concerned about our people, Americans, all Americans in Egypt. Protection of Americans in Egypt, not just only our diplomats but all Americans, is of the highest priority," he said.