Transgender troops can remain in the US military, but the armed services can continue to block their enlistment, an appeals court ruled on Monday in a split decision with potentially significant consequences for the Trump administration’s anti-diversity agenda.

The divided, majority opinion by a three-judge panel of the US court of appeals for Washington DC is expected to be challenged by the government. And the case is ultimately likely to reach the US supreme court.

The ruling was held from going into immediate effect, allowing the administration time to ask the full appeals court to hear the case.

But it represents a blunt rebuke of the US defense secretary Pete Hegseth’s implementation of Donald Trump’s January 2025 presidential order mandating the removal of hundreds of transgender service members.

Such banning of transgender people from the military is illegal and “both arbitrary, and based on animus”, Robert Wilkins, a circuit judge, wrote in the majority opinion.

Monday’s decision mostly upholds a preliminary injunction issued by Ana Reyes, a district court judge, in March 2025 preventing the dismissal of six active-duty transgender people who are the plaintiffs in the lawsuit.

At the time, Reyes wrote: “The court knows that this opinion will lead to heated public debate and appeals. In a healthy democracy, both are positive outcomes.

“We should all agree, however, that every person who has answered the call to serve deserves our gratitude and respect.”

Trump’s order had claimed the sexual identity of transgender service members “conflicts with a soldier’s commitment to an honorable, truthful, and disciplined lifestyle, even in one’s personal life”. The order also argued that transgender service members’ sexual identity was harmful to military readiness.

Hegseth subsequently issued a policy presumptively disqualifying people with gender dysphoria, a medical condition arising from a person’s distress related to feelings about their gender identity, from military service.

The appeals court judges on Monday were ruling on the government’s appeal of Reyes’s injunction. They decided to narrow its scope to the estimated 1,000 members of the military who openly identify as trans – but not those who are seeking to join.

“In this litigation, the government has not attempted to defend or provide any factual basis for these disparaging characterizations of American citizens,” Wilkins wrote, adding that the policy “appears to be driven by the bare desire to harm a politically unpopular group: persons who identify as transgender”.

Wilkins was appointed to the appeals court by Barack Obama, a former Democratic president.

The dissenting judge, Justin Walker, appointed by Trump during the Republican’s first presidency, argued that the judiciary did not have the necessary authority or experience to determine who could be excluded from the military.

He wrote that only the executive and legislative branches of the federal government “are responsible for system-wide military judgments about the composition of the armed forces”.

“The supreme court has never assumed that role for itself,” Walker added. “Neither has the DC Circuit. Not until today.”

There was no immediate reaction to the ruling from the White House or defense department.

The Associated Press contributed reporting