* Case raises questions about respect for media freedom
* Greste, Fahmy and Mohamed all deny the charges
* Kerry calls verdicts chilling and draconian
* Verdict draws condemnation from West, rights groups (Adds Egyptian reaction)
By Maggie Fick
CAIRO, June 23 (Reuters) - Three Al Jazeera journalists were jailed for seven years each by an Egyptian judge on Monday, in what Washington called "chilling, draconian sentences" that must be reversed.
Cairo defended the journalists' convictions - for aiding a "terrorist organisation" - and rejected the widespread condemnation as "interference in its internal affairs".
The three, who all denied the charge of working with the now banned Muslim Brotherhood, included Australian Peter Greste and Canadian-Egyptian national Mohamed Fahmy, Cairo bureau chief of Al Jazeera English.
The third defendant, Egyptian producer Baher Mohamed, was given an extra three years for possessing a single bullet, at the hearing attended by Western diplomats, some of whose governments summoned Egypt's ambassadors over the case.
The men have been held at Egypt's notorious Tora Prison for six months, with the case becoming a rallying point for rights groups and news organisations around the world.
They were detained in late December and charged with helping "a terrorist group" - a reference to the Muslim brotherhood - by broadcasting lies that harmed national security and supplying money, equipment and information to a group of Egyptians.
The Brotherhood was banned and declared a terrorist group after the army deposed elected Islamist president Mohamed Mursi in July following mass protests against his rule. The Brotherhood says it is a peaceful organisation.
Al Jazeera, whose Qatari owners back the Brotherhood and have been at odds with Egypt's leadership, said the ruling defied "logic, sense and any semblance of justice".
"There is only one sensible outcome now. For the verdict to be overturned, and justice to be recognised by Egypt," Al Jazeera English managing director Al Anstey said in a statement.
The ruling came a day after U.S. Secretary of State John Kerry met newly elected Egyptian President Abdel Fattah al-Sisi in Cairo and raised the issue of the journalists.
On Monday, Kerry said he called Egypt's foreign minister to register his "serious displeasure" at the "chilling, draconian sentences".
"Injustices like these simply cannot stand if Egypt is to move forward in the way that President al-Sisi and Foreign Minister (Sameh) Shoukry told me just yesterday that they aspire to see their country advance," Kerry said in a statement.
The court descended into chaos as the verdict was read out. Near tears, Greste's brother Michael said: "This is terribly devastating. I am stunned, dumbstruck. I've no other words."
The three men had looked upbeat as they entered the courtroom in handcuffs, waving at relatives who had earlier told journalists they expected them to be freed for lack of evidence.
One Dutch woman and two Britons were sentenced to 10 years in absentia on the same charges of aiding a "terrorist group".
Judicial sources told Reuters the verdicts could be appealed before a higher court and a pardon was still possible.
Egypt's public prosecutor last week ordered the release of another Al Jazeera journalist, Abdullah al-Shamy, on health grounds after he spent more than 130 days on hunger strike.
Western governments and rights groups have voiced concern over freedom of expression in Egypt since Mursi was ousted. The crackdown has reinforced doubts about Egypt's democratic credentials three years after an uprising toppled Hosni Mubarak and raised hopes of greater freedoms.
The case comes after a similar outcry over mass death sentences being handed down to Brotherhood supporters.
"Egypt's reputation, and especially the reputation of its judiciary as an independent institution, are at stake," U.N. human rights chief Navi Pillay said. "There is a risk that miscarriage of justice is becoming the norm in Egypt."
Britain, whose ambassador attended the hearing, said it was summoning the Egyptian ambassador to protest.
"Freedom of the press is a cornerstone of a stable and prosperous society," Foreign Secretary William Hague said.
The Dutch foreign minister also summoned Egypt's ambassador. Australian Foreign Minister Julie Bishop said her government was "deeply dismayed that any sentence was imposed" and was "appalled by the severity of it".
"The Egyptian foreign ministry strongly rejects any comment from a foreign party that casts doubt on the independence of the Egyptian judiciary and the justice of its verdicts," the foreign ministry said in a statement.
Human Rights Watch said: "These... verdicts are a stark admission that in today's Egypt, simply practicing professional journalism is a crime and that the new constitution's guarantees of free expression are not worth the paper they are written on."
Egyptian officials have said the case is not about freedom of expression and that the journalists raised suspicions by operating without proper accreditation.
Despite Kerry's condemnation on Monday, U.S. concerns are balanced by an acknowledgement of the importance of Egypt as a strategic partner in the Middle East.
Kerry said on Sunday Egypt would be given aid in the form of Apache helicopters to use against militants in the Sinai peninsula that borders Israel.
Many Egyptians see Al Jazeera as a force determined to destabilise the country, a view that has been encouraged in the local media, which has labelled the journalists "The Marriott Cell" because they worked from a hotel of the U.S.-based chain.
A video that appeared on a pro-government channel and spread online, reinforced the view that the journalists had sinister intents, showing their arrest in their hotel room, with close-ups of their computers, cameras and communications equipment.
Al Jazeera's Cairo offices have been closed since July 3 when security forces raided them hours after Mursi was ousted. Criticism of the government and army has virtually vanished from Egyptian media since then.
In total, 20 people were sentenced on Monday. They included at least 14 Egyptians who were charged with belonging to the Muslim Brotherhood.
Two were acquitted, including Anas al-Beltagi, the son of a senior Brotherhood official who is in jail. Four received seven-year sentences and the rest 10 years in absentia. (Additional reporting by Amena Bakr in Doha, Lin Noueihed and Yasmine Saleh in Cairo, Thomas Escritt in Amsterdam and Byron Kaye in Sydney; Writing by Lin Noueihed; Editing by Alison Williams and Robin Pomeroy)