(Adds Fallon's age, paragraph 10)

By Andrew Gray and David Morgan

WASHINGTON, March 11 (Reuters) - The top U.S. commander for the Iraq and Afghanistan wars said on Tuesday he would quit after a magazine reported he was pushing President George W. Bush to avoid war with Iran.

Adm. William "Fox" Fallon, head of the U.S. Central Command headquarters responsible for the Middle East, insisted he did not disagree with the Bush administration over Iran but perceptions of a rift made it difficult for him to do his job.

Defense Secretary Robert Gates dismissed suggestions that Fallon's departure made war with Iran more likely.

"The notion that this decision portends anything in terms of a change in Iran policy is ... ridiculous," Gates said.

"Admiral Fallon reached this difficult decision entirely on his own," Gates said at the Pentagon.

"I believe it was the right thing to do, even though I do not believe there are, in fact, significant differences between his views and administration policy."

The Bush administration says its policy is to use diplomacy to resolve differences with Iran, particularly over Tehran's nuclear program, but it will not rule out military action.

Washington and other Western nations say Iran is trying to develop the capability to build nuclear weapons. Iran says its program is to produce energy.

Fallon's headquarters in Tampa, Florida, oversees U.S. operations in 27 countries, including Iraq and Afghanistan.

The first Navy officer to serve as Central Command chief, 63-year-old Fallon has been in the post for just under a year. Gates accepted his request to retire at the end of the month.

Fallon is known as a tough, plain-speaking commander but also has a reputation for favoring dialogue. He pursued good relations with China when he headed U.S. Pacific Command.

"BETWEEN WAR AND PEACE"

Titled "The Man Between War And Peace," the Esquire article that led to his resignation described him as challenging the White House and urging restraint on Iran.

Fallon cooperated with the author during the article's preparation but strongly criticized the story after it appeared, describing it as "poison pen stuff."

Gates said the perception that Fallon was at odds with the administration was not linked just to the article.

"We have tried between us to put this misperception behind us over a period of months and, frankly, just have not been successful in doing so," he said.

"I think this is a cumulative kind of thing."

Fallon has also denied reports he has a testy relationship with Army Gen. David Petraeus, the top U.S. commander in Iraq.

Democrats in the U.S. Congress charged that Fallon's departure was another sign the Bush administration did not tolerate military commanders who spoke their mind.

The Pentagon rejected that, saying Gates had encouraged openness since taking over from Donald Rumsfeld in December 2006.

Fallon's deputy, Army Lt. Gen. Martin Dempsey, will run Central Command until a long-term successor is found, Gates said.

Fallon said in a statement: "Recent press reports suggesting a disconnect between my views and the president's policy objectives have become a distraction at a critical time and hamper efforts in the CENTCOM region."

He said he had concluded that it "would be best to step aside and allow the Secretary and our military leaders to move beyond this distraction."

Both Gates and Bush praised Fallon's military service.

"Admiral William Fallon has served our nation with great distinction for forty years," Bush said in a statement.

"During his tenure at CENTCOM, Admiral Fallon's job has been to help ensure that America's military forces are ready to meet the threats of an often troubled region of the world, and he deserves considerable credit for progress that has been made there, especially in Iraq and Afghanistan," Bush said. (Editing by Patricia Wilson and Philip Barbara)

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