The Wales flanker will be the second player to captain the Lions twice, after England great Martin Johnson (1997, 2001).
In contrast, New Zealand-born hooker Hartley is the third successive England skipper to miss out on Lions selection after Steve Borthwick and Chris Robshaw.
England's Jamie George, Ireland's Rory Best and Wales' Ken Owens are the three hookers selected, while Wales number eight Ross Moriarty and New Zealand-born Ireland centre Jared Payne are among the surprise names on the list.
"The selections reflect that", he said, calling Sam Warburton's appointment as captain "a no-brainer".
The former Scotland prop, who was part of the only Lions team to beat the All Blacks in a Test series back in 1971, accused the current head coach of "not liking people from Scotland".
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"There's been healthy debate about the squad and now that it's been announced we need to get it behind it 100% and get excited about travelling to New Zealand", Gatland said.
"In the last two days, however, I have been really nervous due to the speculation and it would have hurt me if I hadn't been in the squad". I was in a supermarket auto park - my wife was getting bread and milk and I didn't want to go in because the girl on the checkout lives rugby - and I hung up on Gats first time round. He also skippered them on the successful 2013 tour of Australia.
Gatland, unusually for the Lions, indicated that his captain's place in the team was not a given. We just needed to make sure we have the depth and quality in the squad to make sure we can handle the quality of the sides we're coming up against.
The former Wales head coach, who has representatives from Ireland, Wales and England on his coaching staff, added: "Look, we understand they are going to be disappointed but it wasn't about what nation you come from". His performance against England - one of the showings of this year's Six Nations - saw his stock rocket.
He was on course for the British & Irish Lions squad until December, when he had one indiscretion too many.
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As a player, Telfer toured both New Zealand and South Africa with the Lions, before coaching them in 1983, and doing his famous job as assistant coach to Ian McGeechan in '97.
"I wouldn't have wanted to be the person to pick that Lions back five, I would have felt very guilty because there was always going to be a lot of top players missing out".
"He's bounced back from a lot of things, he's a strong character".
There was no room for three key players for England: lock Joe Launchbury, flyhalf George Ford or fullback Mike Brown.
He selected 12 from Wales, 11 from Ireland and a meagre two from Scotland: the full-back Stuart Hogg and wing Tommy Seymour.
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The tour will take place from 3 June to 8 July, and will feature three tests against world champions New Zealand as well as a match with Maori All Blacks at Rotorua International Stadium, a week before the opening All Blacks game.