The memo also halts the use of government funds for sex-reassignment surgery for active personnel.
But Mr Trump left Defence Secretary Jim Mattis to decide whether to retain existing transgender recruits.
The ban, justified on grounds of cost and disruption, faces a legal challenge by transgender rights activists.
"This policy is a shameful slap in the face to people who put their lives on the line everyday to defend our country..." said Jennifer Levi, an official at Glad (GLBTQ Legal Advocates & Defenders), in a statement.
"We are moving quickly with our plaintiffs to see that a court puts a stop to this latest demonstration of President Trump playing politics with people's lives."
Between 4,000 and 10,000 US active-duty and reserve service members are believed to be transgender.
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