Kerrey, a former U.S. senator and governor of Nebraska, has been in a tough battle with Republican state Sen. Deb Fischer to win the seat being vacated by Democratic Sen. Ben Nelson, who is retiring.
Hagel served in the U.S. Senate from 1996 to 2008 and has a reputation for being an individualist and crossing political lines. Hagel and Kerrey served together in the Senate and both are Vietnam War veterans who developed a friendship, the Omaha World-Herald reported.
Recent polls indicated the race, considered crucial if the Republicans are to take over the Senate, is tightening. A World-Herald poll this week indicated Kerrey trailed by 3 percentage points.
Republicans downplayed the endorsement, saying Hagel hasn't lived in Nebraska since he left the Senate.
"They have long been friends. It's not a surprise," Nebraska Republican Party Chairman Mark Fahleson said. "It's just another out-of-touch, longtime Washington insider endorsing another out-of-touch Washington insider. At the end of the day, Chuck Hagel has long lost touch with Nebraskans."