Biden's new policy was set in an executive order signed at the White House.

"Simply put, transgender servicemembers will no longer be subject to the possibility of discharge or separation on the basis of gender identity," the White House said in a statement.

The military "thrives when it is composed of diverse Americans who can meet the rigorous standards for military service, and an inclusive military strengthens our national security."

The move undoes Trump's controversial decision in July 2017 to bar transgender personnel from serving "in any capacity" in the military.

As commander-in-chief, the US president has enormous latitude to set Pentagon policies.

Trump chose to nix a plan implemented by former president Barack Obama for the military to start accepting transgender recruits.

Trump had claimed the Obama-era policy was disruptive, expensive and said it eroded military readiness and camaraderie among troops.

But in Biden's order undoing Trump's ban, the White House cited a 2016 study that found "enabling transgender individuals to serve openly in the United States military would have only a minimal impact on military readiness and health care cost."