Officials familiar with the document told the Wall Street Journal that the regulations will ultimately allow Mattis to consider a service member's ability to deploy when deciding whether to give them the boot.
Mattis also will have six months to implement the new ban - and the memo defines "deployability" as the ability to serve in a war zone, participate in exercises or live for months on a ship, the officials said.
Donald Trump's White House finally issued rules for the transgender military ban the president announced almost a month ago.
The surprise announcement, citing healthcare costs and unit disruption, appealed to some in Trump's conservative political base but created uncertainty for thousands of transgender service members, many of whom came out after the Pentagon said in 2016 it would allow transgender people to serve openly.
Trump sparked widespread outrage last month when he announced on Twitter that he would be reinstating the ban on transgender military service - which was lifted previous year by the Obama administration.
There has been overwhelming condemnation of President Trump's transgender military ban.
GOP group attacks Flake challenger as Trump heads to Arizona
Trump is incensed that Flake wrote a book blaming his party for the rise of Trump and breaking down a case against the president . And Ward is expected to be in attendance, as a sign of the president's decision to snub Flake.
Marine Gen. Joseph Dunford, chairman of the Joint Chiefs of Staff, announced on July 27 that the Pentagon would not enact a ban until they had official orders from the White House, according to the LA Times.
If the proposed guidelines are implemented, opponents of the military ban will surely be up in arms.
According to the Journal, gender dysphoria is recognized as a condition requiring medical treatment by many professional associations.
A Rand Corp. study estimated that the number of transgender troops ranges from 1,320 to 6,630 out of 1.3 million service members.
The American Military Partner Association - a group for families of LGBT service members and veterans - said they condemned the details of the reported guidance. "They have earned their right to appropriate medical care, and President Trump's attempt to rip that away is beyond unconscionable".