The ban on transgender individuals serving in the US military "continually should be reviewed", Defence Secretary Chuck Hagel said.
Hagel did not indicate whether he believes the policy should be overturned. However, he said "every qualified American who wants to serve our country should have an opportunity if they fit the qualifications and can do it".
A panel convened by a think tank at San Francisco State University recently estimated that about 15,450 transgender personnel already serve in the military and in the National Guard and Reserve.
In 2010, Congress passed legislation allowing gays and lesbians to serve openly. Hagel said the issue of transgender people serving in the military was more complicated. He said "these issues require medical attention" that at times could not be provided in austere locations.
The National Centre for Transgender Equality said it welcomed Hagel's comments, which were made on ABC television's This Week. Its executive director, Mara Keisling, said the regulations that disqualify transgender recruits were based on outdated prejudices and stereotypes.
"If the secretary were able to meet and talk with the trans service members I've met, he'd understand the answer is self-evident. These are amazing people who serve even though they must hide a basic part of who they are," Keisling said.
SPART*A, an advocacy group made up of lesbian, gay, bisexual or transgender people who now serve or once served in the military, said a review of the policy was long overdue. "Many of our allies, including the UK, Australia and Israel, allow transgender people to serve in their armed forces. It's time for the US to join them," said Allyson Robinson, the group's policy director and a former army captain.