Biden's new policy was set in an executive order he signed at the White House, the latest in a string of directives aimed at reversing Trump-era policies.

"What I'm doing is enabling all qualified Americans to serve their country in uniform," Biden said.

"Transgender personnel, if qualified in every other way, can serve their government in the United States military."

The move undoes former president Donald Trump's controversial orders in 2017 and 2018 to severely limit the areas where transgender Americans can serve in the US military forces.

Trump had claimed that transgender service members were disruptive, expensive and eroded military readiness and camaraderie among troops.

His ban meant transgender troops who were encouraged to come out under one administration suddenly faced getting booted under another -- opening up a legal quagmire for the Pentagon.

A series of lawsuits from affected military personnel followed, with the Supreme Court ultimately allowing the ban to take effect while the litigation worked its way through lower courts.

Biden's order restores the policy set by President Barack Obama, under whom Biden served as vice president.

"Simply put, transgender service members 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."

- 'Victory over prejudice and discrimination' -

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."

The US military has more than 1.3 million troops, and the Pentagon estimates about 9,000 identify as transgender, including about 1,000 who had gender-reassignment surgery or plan to do so.

Newly appointed Defense Secretary Lloyd Austin said he fully supported Biden's order.

The Defense Department "will immediately take appropriate policy action to ensure individuals who identify as transgender are eligible to enter and serve in their self-identified gender," Austin said in a statement.

No one would be separated or discharged from the service based on their gender identity, as Trump had threatened, he said.

In addition, Austin said that the Pentagon would pay for all "medically necessary transition related care."

"This is the right thing to do. It is also the smart thing to do," said Austin.

The American Civil Liberties Union, which had sued over Trump's ban, welcomed Biden's order as sending "a message that transgender people not only belong in our armed services, but in our country."

The Palm Center think tank, which focuses on sexual minorities in the military, called Biden's order "a victory of evidence-based policy over prejudice and discrimination."

"If you can do the job, you should be allowed to do the job, regardless of who you are," the group said on Twitter.