The United States has been urged to join the dozen other nations that allow transgender people to serve in the armed forces.
A commission led by a former US surgeon general made the call in a report released on Thursday that concludes there is no medical reason for the decades-old ban and calls on President Barack Obama to lift it.
The five-member panel, convened by a think tank at San Francisco State University, said Department of Defense regulations designed to keep transgender people out of the military are based on outdated beliefs that require thousands of current service members either to leave the service or to forego the medical procedures and other changes that could align their bodies and gender identities.
"We determined not only that there is no compelling medical reason for the ban, but also that the ban itself is an expensive, damaging and unfair barrier to health care access for the approximately 15,450 transgender personnel who serve currently in the active, Guard and reserve components," said the commission.
The panel was led by Dr Joycelyn Elders, who served as surgeon general during Bill Clinton's first term as president, and Rear Admiral Alan Steinman, a former chief health and safety director for the Coast Guard.
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The White House on Thursday referred questions to the Department of Defense.
"At this time there are no plans to change the department's policy and regulations which do not allow transgender individuals to serve in the US military," said Navy Lieutenant Commander Nate Christensen, a defence department spokesman.
The report says scholars have yet to find government documents explaining the basis for the ban, which has existed in medical fitness standards and conduct codes since the 1960s.
However, it appears rooted in part in the psychiatric establishment's long-held consensus, since revised, that people who identity with a gender different from the one assigned at birth suffer from a mental disorder.
The ban also was apparently based on the assumption that providing hormone treatment and sex reassignment surgeries would be too difficult, disruptive and expensive. But the commission rejected those notions as inconsistent with modern medical practice and the scope of health care services routinely provided to non-transgender military personnel.
