Han Min-koo, former chairman of the Joint Chiefs of Staff, was also nominated as Kim's successor.
The announcement came about 10 days after then national security chief Kim Jang-soo and National Intelligence Service director Nam Jae-joon stepped down in the aftermath of the ferry disaster.
Kim Kwan-jin will take office immediately as his new position is not subject to a parliamentary hearing. He will also continue ministerial duties until Han is approved by the National Assembly.
"The nomination is to prevent any security vacuum and consolidate the security posture in the face of North Korea's continuing provocations and threats," presidential spokesman Min Kyung-wook said.