The AFL has ruled that transgender player Hannah Mouncey is ineligible for selection in the 2018 AFLW draft.

The draft will be held today in Melbourne.

Mouncey had previously played for the Australian men's handball team before transitioning — she has played several games in the ACT women's AFL competition in 2017.

"The subcommittee carefully considered all of the information provided by Hannah, as well as the available data on transgender strength, stamina, physique along with the specific nature of the AFLW competition," the AFL said in a statement.

"A provisional decision was made and communicated to Mouncey and the AFLPA.

"Further information was submitted by Mouncey on Monday [16th October] in response to the AFL's provisional decision.

"These submissions were reviewed by the subcommittee and it determined that Mouncey's nomination cannot be accepted for the 2018 AFLW draft."

The AFL said the subcommittee took into account the stage of maturity of the AFLW competition, its current player base and Mouncey's individual circumstances.

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The AFL stated that the decision only referred to the 2018 draft and the 2018 AFLW competition.

Mouncey may nominate for future AFLW drafts and for registration in other Australian football competitions.

The AFL's general manager of inclusion and social policy, Tanya Hosch, thanked Mouncey for her understanding in going through the process.

"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," Hosch said.

"It was important to involve the right stakeholders to review all the information and data available.

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

"We acknowledge Hannah's openness and co-operation. 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."

Mouncey wishes teammates luck in draft

Mouncey released a statement on Tuesday evening in response to the AFL's decision.

"While I am extremely disappointed with the AFL's decision regarding my participation in tomorrow's [Wednesday's] AFLW draft, I thank them for the genuine way in which they approached my situation," she said.

"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.

"I will be making no further comment at this time."

She also posted on Twitter in support of everyone taking part in the draft.

"Good luck to all the girls who nominated for the AFLW draft tomorrow [Wednesday], especially my mates from Canberra," Mouncey wrote.

"I can't wait to see you all at the highest level and to play with and against you back in Canberra next year!"

Hannah Mouncey has spoken previously about the need for sport to lead the way by including transgender athletes. ( Supplied: Hannah Mouncey )

AFLPA critical of late decision

The AFL Players Association — which had been assisting Mouncey through the nomination process — acknowledged that the issue was "complex", but was critical of the AFL's timeframe for reaching a decision.

"Whilst Hannah was provided with the opportunity to discuss her application with the AFL, the AFLPA believes there should have been clear guidelines available for transgender players wishing to enter the AFLW draft this year," AFLPA general manager of player relations Brett Murphy said in a statement.

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

"We have urged the AFL to prioritise the development of guidelines detailing the process and parameters for entry into the AFLW competition, so that Hannah and any other players have a clear understanding of their eligibility."