* Von der Leyen surprise choice for one of top jobs
* Family minister 2005-2009, labour minister 2009-2013
* One of CDU's most popular leaders but conservative wing wary
By Erik Kirschbaum
BERLIN, Dec 15 (Reuters) - German Chancellor Angela Merkel named Ursula von der Leyen as her new defence minister on Sunday, a surprising choice that could vault the ambitious ally into the lead as the front runner to one day succeed the chancellor.
Merkel, 59, will begin her third term on Tuesday - three months after winning the Sept. 22 election - now that her junior coalition partners, the Social Democrats, voted on Saturday to join her in a "grand coalition".
Even though Merkel has an aversion to the unexpected, she pulled a rabbit out of her hat in picking the spirited von der Leyen to lead defence, one of the top jobs in her cabinet with a 33-billion-euro budget.
"Those who know her know that she has always had an interest in international issues alongside social policies," Merkel told a news conference. "It's an exciting job filled with challenges that I'm confident she'll master very well."
Merkel has no designated successor and has denied speculation she would step down midway through her next term. But the remarkable turn of events will revive all that if the 55-year-old von der Leyen is successful as Germany's first woman defence minister.
"Those who know von der Leyen know she's got the toughness needed for the difficult job," wrote Bild am Sonntag columnist Michael Backhaus on Sunday. "Merkel showed a lot of courage picking von der Leyen, courage she lacked in the negotiations."
Von der Leyen is a controversial figure in the conservative wing of Merkel's Christian Democrats, in part for openly defying the chancellor on women's rights as labour minister in a riveting battle that erupted five months before the election.
She forced Merkel to make concessions in her opposition to binding quotas for women on company boards by threatening to break ranks and back an opposition bill - seen as an act of betrayal in conservative circles because it would have embarrassed Merkel.
Von der Leyen only backed down at the last minute after she and fellow rebels extracted from the party a promise to include a quota in its election program - which was later incorporated in the coalition agreement.
Von der Leyen had aspirations to be foreign minister but it went to the SPD as did her current job.
A gynaecologist who served as family minister in the first "grand coalition" with the SPD from 2005 to 2009, von der Leyen reportedly turned down Merkel's initial offer to lead the lowly Health Ministry - a risky gambit that paid off.
On Saturday speculation in Berlin was first rampant that she would be interior minister before reports later emerged that she would replace Thomas de Maiziere as defence minister. He was once seen as a successor to Merkel but fell out of favour over a procurement scandal that cost 680 million euros.
The defence minister is in charge of a massive organisation with 185,000 soldiers and 70,000 civilian employees.
MERKEL'S OTHER CABINET PICKS
Fluent in English and French, von der Leyen is among the CDU's most popular politicians despite the animosity from its conservative wing for her efforts to modernise the party. Proposals for a formal, binding quota for more women in top positions in companies, for instance, have drawn criticism.
Her popularity stems from an engaging speaking style, down-to-earth manner and the determined way in which she has pushed the CDU towards the centre. Her signature issue was creating more childcare facilities in a country of stay-at-home mothers.
A mother of seven who was born in Brussels and lived in Britain and the United States, she grew up surrounded by politics. Her father Ernst Albrecht was a CDU state premier for Lower Saxony from 1976 to 1990. A rarity in German politics, she came to it late when she was 42 after a career in medicine.
Merkel surprised Germany four years ago by picking Wolfgang Schaeuble as finance minister, a post the 71-year-old has retained as one of the country's most popular post-war finance ministers. She praised Schaeuble's experience.
"His name stands for euro stability and I'm glad that he's continuing," Merkel said.
Her other cabinet picks included: de Maiziere as interior minister, Hermann Groehe as health minister, Johanna Wanka will stay as education minister and Peter Altmaier, the former environment minister, will become her chief of staff.
The CDU's Bavarian sister party, the Christian Social Union (CSU), named Alexander Dobrindt as transport minister, Hans-Peter Friedrich will be agriculture minister and Gerd Mueller development minister.
SPD chairman Sigmar Gabriel formally announced the six SPD ministers on Sunday: Gabriel himself will be economy minister and vice chancellor, Frank-Walter Steinmeier will be foreign minister, Andrea Nahles will be labour minister, Heiko Maas will be justice minister, Manuela Schweisig will be family minister and Barbara Hendricks will be environment minister.
Joerg Asmussen, a highly regarded executive board member of the European Central Bank in Frankfurt, agreed to return to Berlin to be deputy labour minister for "purely private family reasons".