The new regulation will come into effect next season and apply to youth and amateur football and futsal.
Germany's football federation says transgender, intersex and non-binary players can decide themselves whether to play in men's or women's teams.
The new regulation for gender-nonconforming players with the civil status “diverse” or “unspecified” was passed on Thursday.
It will come into effect next season and will apply to youth and amateur football, as well as futsal.
“It applies to transgender players who can now switch at a self-determined time or remain initially in the team in which they’d been playing previously,” the federation (DFB) said in a statement.
“As long as the sporting activity does not affect the health of the person while they are taking medication, the person can take part in the game, which is why the new regulation excludes doping relevance.”
The move bucks a recent trend in sport, where transgender women have been banned from female competitions.
Sabine Mammitzsch, who oversees women’s and girls’ football at the DFB, says there has long been a need for clarification.
“The state and regional associations, but also relevant people at a grassroots level, have been signalling for a long time that there are uncertainties with how to accommodate transgender, intersex and non-binary players,” Mammitzsch said.
“Therefore, they very much welcome the introduction of a national, comprehensive rule on the right to play.”
'Competition's integrity will not be jeopardised'
The new rules for gender-nonconforming players have already been tested at a local level in Berlin since 2019.
State and regional associations will now nominate officials to help any gender-nonconforming players in granting their right to play while working closely with local anti-violence and anti-discrimination officers.
“Experience has shown that this does not jeopardise the integrity of the competition,” the DFB said.
“After all, all people have different physical strengths and abilities that only lead to success together in a team, regardless of gender.”
The German football federation is the world’s largest, with some seven million members, 24,000 clubs, 130,000 teams, and more than 2.2 million players across all of its leagues, divisions and competitions.
“With the regulation of the right to play, we are creating further important prerequisites to enable players of different gender identities to play,” added DFB diversity officer and former international player Thomas Hitzlsperger.