I am trying to create a google container engine cluster using gcloud tool. It gives very long names to the nodes - gke-CLUSTER-NAME-default-pool-*****. Is there any way to give a custom name to machines like we give to google compute instances while creating them?
No, there isn't a way to specify custom node names. You can name a node pool, which will change the middle part of the node name but they will still have the same overall format.
Nodes in a Kubernetes/GKE cluster are intended to be generic compute resources and treated as cattle rather than individualized units treated as pets. Most uses of the cluster should have no need to identify individual nodes nor rely on the specific way that nodes are named.