Women who have transitioned from male to female would make a "very interesting test case" for the British Army, Lieutenant General Andrew Gregory said, although the force has never yet addressed the issue as it hasn't yet "come up".
Women are currently barred from serving in the infantry and in armoured units, but Gregory implied that female transgender soldiers could be an exception to the rule.
He told Pink News: "It would be a very interesting test case if it did come up. If somebody - birth gender male - who physically has all the physical strength and durability but had transitioned, they might well be able."
He said there could be practical issues for female transgender soldiers in the infantry, explaining that accommodation may not be suitable, but added that the forces should not "directly exclude" transgender people.
He said: "We do not yet have any female transgender people serving in the infantry. We haven't had to address it because we haven't had the issue come up."
In January, the army's first transgender officer Hannah Winterbourne was praised for speaking openly about realising her "body was wrong" while she was serving in Afghanistan.
She realised she was a woman while at Sandhurst at the age of 23 and has been praised for setting an example to trans people around the world.
Combat roles could be opened up to all females by next year after a Government-commissioned report recommended such a move.
Gregory admitted that there are still pockets of homophobia in the forces, but said he wishes to make the organisation as inclusive as possible.
The UK military has won several equality accolades in recent times, including last year being named the world's second most gay-friendly military in the world by a think-tank.
Meanwhile the Ministry of Defence won the most improved employer award in Stonewall's Workplace Equality Index.
It comes after Staff Sergeant Kate Lord, 32, was given a medal for challenging the "highly misogynistic" views of Afghan soldiers.
She received the prestigious Queen's Commendation for Valuable Service for challenging the opinions of young men in the Afghan National Army, who accused her of being weak and said they were shocked that her husband would let her go to Afghanistan.