Jeffrey Laude, 26, was found dead, apparently strangled and drowned, beside a toilet bowl in a motel room in Olongapo city, northwest of Manila, shortly after he checked in late Saturday, allegedly with a Marine.
Police said they have identified the Marine suspect with the help of a key witness. Authorities will file a murder complaint against him with prosecutors on Wednesday, national police spokesman Wilben Mayor said.
About 3,000 US Marines and Navy sailors concluded two weeks of military exercises with Filipino counterparts last Friday and were to leave the Philippines this week.
US Pacific commander Adm Samuel Locklear, who was in Manila for annual security talks with Philippine defense officials, initially ordered the Peleliu and other Navy ships to stay in the Philippines pending an investigation into the killing.
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The thorny issue emerged amid a blossoming of security ties between the United States and the Philippines, which have both been vocal critics of China's expansive territorial claims in the South China Sea.
The longtime military allies signed a new accord in April that allows greater US military access to Philippine military camps across the country.
Military chief of staff Gen Gregorio Pio Catapang said the incident destroyed the positive image of the just-concluded military exercise, in which the suspect in the killing took part, but added that "this will not affect our relationship with the United States."
Police said Laude's attacker may have been angered when he discovered in the motel room that Laude was a transgender individual or because of an argument sparked by other reasons.