By Kirsty Needham

SYDNEY, March 20 (Reuters) - A former U.S. Marine Corps pilot may have been "lured" from China to Australia by security agencies before his arrest, his lawyer said outside court on Monday after an extradition hearing in Sydney.

Daniel Duggan, 54, is facing extradition to the United States on charges of breaking U.S. law by training Chinese military pilots to land on aircraft carriers.

He was arrested by Australian federal police in a rural town in New South Wales state in October, shortly after returning from China, where he had lived since 2014.

In the same week, Britain had issued a warning to its former defence staff not to train Chinese People's Liberation Army pilots at a South African flying academy where Duggan had also worked.

On Monday, Duggan's extradition case was adjourned until May, as his lawyers seek access to documents from Australian government agencies for his defence.

Outside court, Duggan's lawyer Dennis Miralis said the pilot had been given a security clearance by the Australian Security and Intelligence Organisation to start a new aviation job before he returned from China, but an arrest warrant was issued while he was on the plane home and his security clearance was revoked.

He said such a "lure" was legal under U.S. law, but it would be "a matter of grave significance" if Australian security agencies had given Duggan a security clearance to provide "a false sense that he would be able to return to Australia".

"We are exploring at this stage whether or not he was lured back to Australia by the U.S., where the U.S. knew he would be in a jurisdiction where he would be capable of being extradited," he added.

ASIO did not immediately respond to a request for comment.

Duggan, who is being held in a maximum-security prison, is an Australian citizen who renounced his U.S. citizenship. Before moving to China in 2014, he had lived in Australia for a decade and has six children in Australia.

Miralis said Duggan was concerned that political tensions between the U.S. and China were affecting his case.

In a statement released to media, Duggan said he rejected the allegations against him.

"The insinuation that I am some sort of spy is an outrage," he said in the statement.

Britain's air force chief said this month intelligence agencies in Australia and Britain had shared information to warn pilots against working for Beijing.

Australian police are investigating a former British military pilot suspected of involvement in the training of Chinese military pilots at a flying school in South Africa, a Sydney court was told on Friday. (Reporting by Kirsty Needham. Editing by Gerry Doyle)