However, eliminating the "don't ask, don't tell" policy will cause "some disruption" in the force, Adm. Michael Mullen, chairman of the Joint Chiefs of Staff, said in testimony before the Senate Armed Services Committee.
"I cannot escape being troubled by the fact that we have in place a policy which forces young men and women to lie about who they are in order to defend their fellow citizens," Mullen said.
Defense Secretary Robert Gates told the committee that the military would need a year to study how it would allow gay men and lesbians to serve openly in the ranks.
Gates has tapped his chief legal adviser and a four-star Army general to lead a landmark study on how the military would lift its ban on openly gay servicemembers. Pentagon General Counsel Jeh Johnson and Gen. Carter Ham, who leads Army forces in Europe, will conduct the year-long assessment.
Gates' announcement marks a measured step toward President Obama's goal of eliminating the military's policy against gays, which is based on a 1993 law.
"That there will be some disruption in the force I cannot deny," Mullen said. "That there will be legal, social and perhaps even infrastructure changes to be made certainly seem plausible."
He also cautioned that military commanders worry about the current war stress on troops and their families. "We need to move forward (with changing policy on sexual orientation) in a manner that does not add to that stress."
Mullen's statement was the strongest yet from the Pentagon on this volatile issue, although he stressed that he was "speaking for myself and myself only."
The policy bans openly gay people from serving in the military but also says that military officers should not ask members of the military about their sexual orientation if they are not engaging in prohibited behavior.
Mullen said allowing homosexuals to serve openly is "an issue of integrity — theirs as individuals and ours as an institution. … I also believe the great young men and women of our military can and would accommodate such a change."
Mullen said he has served with gay people in the military since 1968 and that many worry every day that they will be exposed and kicked out the military.
He said, however, that the military needs time to determine how to make this change.
Sen. Carl Levin, chairman of the committee, said in opening statements that he believed "ending the policy would improve our military's capability and reflect our commitment to equal opportunity."
"I did not find the arguments used to justify "don't ask, don't tell" convincing when it took effect in 1993, and they are less so now," he said.
Levin cited the latest Gallup Poll that said 69% of Americans support the right of gays' to serve. He said the majority of troops already believe they serve alongside gay or lesbian colleagues and one study estimated that 66,000 gays and lesbians are serving today "forced to hide their orientation and at constant risk of losing the chance to serve."
"I want to make one thing perfectly clear upfront: I am enormously proud of, and thankful for, every American who chooses to put on the uniform of our nation and serve at this time of war," he said.
McCain ackowledged the policy hasn't been "ideal" but said it has been effective.
"It has helped to balance a potentially disruptive tension between the desires of a minority and the broader interests of our all-volunteer force," he said.
McCain said saying he is "deeply disappointed," calling the assessment "clearly biased" because it presumes the law should be changed. He said he wanted to hear more from the military on this issue and both he and Mullen said they wanted to do whatever possible to limit any change's effects on combat troops in both Afghanistan and Iraq.
Contributing: Carolyn Pesce in McLean, Va.