The United States government will not accept or allow transgender individuals to serve in any capacity in the US military," Donald Trump tweeted.
"Our military must be focused on decisive and overwhelming victory and cannot be burdened with the tremendous medical costs and disruption that transgender in the military would entail."
He added that the decision came "after consultation with my Generals and military experts".
Some US media outlets have questioned the spending justification. The Washington Post drew attention to an analysis that the US military spends almost $42m (£32m) a year on the erectile dysfunction medication Viagra several times the total estimated cost of transgender medical support.