"Foolish and reckless political leaders set the wrong compass heading and we lost our way. We became the 'Woke Department'," Hegseth said as he kicked off the event in Quantico, Virginia.
"But not anymore," he said.
Addressing the room full of the United States' top generals and admirals, abruptly summoned from around the world last week, Hegseth defended his firings of flag officers.
He said the officers he relieved were part of a broken culture.
He promised sweeping changes to how discrimination complaints are handled and how accusations of wrongdoing are investigated at the Pentagon, saying the current system has top brass walking on "egg shells".
Hegseth announced new directives for troops that include "gender-neutral" or "male-level" standards for physical fitness.
"But when it comes to any job that requires physical power to perform in combat, those physical standards must be high and gender neutral," he said.
"If women can make it - excellent. If not, it is what it is. If that means no women qualify for some combat jobs, so be it. That is not the intent, but it could be the result."
Meetings between top military brass and civilian leaders are nothing new, but the gathering had fueled intense speculation about the summit's purpose given the haste with which it was called and the mystery surrounding it.
"If the words I'm speaking today are making your hearts sink, then you should do the honourable thing and resign," Hegseth said.
"I know the overwhelming majority of you feel the opposite. These words make your hearts full."
Hegseth criticised the look of overweight troops, saying: "It's completely unacceptable to see fat generals and admirals in the halls of the Pentagon."
He said all fitness tests would be set to male benchmarks only and emphasised the importance of grooming standards.
"The era of unprofessional appearance is over. No more beardos," Hegseth told the audience, which sat in silence.
President Donald Trump had earlier called the meeting with the US military's top commanders at the Marine Corps University in Quantico an "esprit de corps".
Taking the stage after Hegseth, Trump spoke warmly of the military in sometimes-wandering remarks that touched on issues like the prowess of US nuclear submarines but also included criticism of the media, former president Joe Biden and Venezuela.
"I am with you. I support you, and as president, I have your backs 100 per cent," Trump told the audience.
The auditorium on Tuesday was filled with senior uniformed officials, seated in front of a stage with a large US flag, a lectern and boards that read: "Strength Service America".
As Trump spoke, several officers sat looking expressionless, and the room was far quieter than the crowds at Trump's usual gatherings.Â
A naval officer took notes.
After his speech, Trump departed the auditorium and there did not appear to be any one-on-one meeting with the assembled military leaders.
It is unclear how much the event cost.
It required military leaders to fly in from around the world before a potential government shut down.
