The AFL says it has barred Mouncey, a former member of the Australian men's handball team, from today’s draft after taking into consideration "transgender strength, stamina, physique, along with the specific nature of the AFLW".

Mouncey, who is six feet two inches tall and weighs 15 stone eight pounds, claimed she was "extremely disappointed" with the ruling which applies to next year’s event only.

The 27-year-old is set to continue to represent Ainslie Football Club, for whom she has played eight matches and 17 goals, in the AFL Canberra competition next year.

She could nominate herself for the AFLW draft in 2019.

"While I am extremely disappointed with the AFL's decision regarding my participation in Wednesday's AFLW draft, I thank them for the genuine way in which they approached my situation,” Mouncey said in a statement.

"Despite not being able to take part in the draft, the AFL has given me the all-clear to play for Ainslie next year in the AFL Canberra competition for which I am very grateful and look forward to doing in 2018, before hopefully being able to nominate for next year's draft."

When making the decision, the AFL said it took into account "the stage of maturity of the AFLW competition, its current player cohort and Ms Mouncey's individual circumstances".

It was based on the Victorian Equal Opportunity Act, which states that athletes can be discriminated against based on their sex or gender "if strength, stamina or physique is relevant".

The AFL has been accused by the AFL Players Association (AFLPA) of lacking "clear guidelines for transgender players".

"No athlete should face such confusion around their eligibility for an elite competition just days out from a draft,” an AFLPA statement reads.

Tanya Hosch, the AFL's general manager of inclusion and social policy, thanked Mouncey for her understanding and positive engagement.

"Hannah's passion for football is undeniable, and I want to thank her and her team for their constructive participation in the decision-making process,” she said.

"Every case will be decided on its own merits along with the individual circumstances of each future nominee.

"We acknowledge Hannah's openness and cooperation.

“She has contributed to a process which will substantially inform the development of the AFL's transgender policy and procedure for future players at the elite level."

Transgender rugby league player Caroline Layt, who represented New South Wales in the Women's State of Origin in 2008, told Australia newspaper The Age that the AFL has sent the wrong message to the LGBTIQ (Lesbian, Gay, Bisexual, Transgender, Intersex and Questioning) community.

"They say play at the community level but don't dream too high, because your goals and dreams aren't going to be met because they're a bridge too far," Layt said.

"If her levels were off the charts then fair enough...she played all year at Ainslie, sure she's big and tall has good skills but she hasn't hurt anyone.

"I watched the AFLW last season and there are some pretty tough women that play and I don't think Hannah would have it all her own way."

The first round of the AFLW’s second season is due to begin in February and will feature eight clubs.