The decision to delay the plan for six months was made on the eve of a deadline set by Mattis's predecessor, Ashton Carter, during Barack Obama's administration.
The five armed service branches can now delay accepting transgender recruits until January 1 as they "review their accession plans and provide input on the impact to the readiness and lethality of our forces," Pentagon spokeswoman Dana White said in a statement.
Last week, White explained that the different services were not in agreement on when to accept transgender recruits.
"Different services had different takes. Some asked for time... There were all kinds of different recommendations."
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An estimated 2,500 to 7,000 transgender people are among the 1.3 million active duty service members.
But these are troops who could not make their sexual preferences openly known prior to joining the military.
Until a year ago, they could be fired for openly expressing their sexual orientation.
"We have reason to be proud today of what this will mean for our military -- because it's the right thing to do, and it's another step in ensuring that we continue to recruit and retain the most qualified people -- and good people are the key to the best military in the world," Carter said last year.