Mattis added that panel members "will bring mature experience, most notably in combat and deployed operations, and seasoned judgment to this task". The panel will "assemble and thoroughly analyse all pertinent data, quantifiable and non-quantifiable".
The Pentagon chief said that after the panel makes its recommendations and he consults the secretary of homeland security, he will provide his advice to Trump.
In the meantime, policy regarding transgender service members will remain in place, Mattis said, meaning that those serving can continue to do so.
The issue has been sensitive since Trump unexpectedly announced on Twitter on July 27 that he was banning all transgender people from serving in the military.
"After consultation with my Generals and military experts, please be advised that the United States Government will not accept or allow Transgender individuals to serve in any capacity in the US Military," he said in three successive tweets.
"Our military must be focused on decisive and overwhelming victory and cannot be burdened with the tremendous medical costs and disruption that transgender in the military would entail. Thank you."
The move caught many senior Pentagon officials by surprise. White House spokeswoman Sarah Huckabee Sanders clarified later that day that no change would be made until an implementation policy was developed.
General Joseph Dunford, the chairman of the Joint Chiefs of Staff, added the following day that transgender service members already serving will be treated with dignity and respect as the Pentagon sorts out its new policy, but that it would carry out Trump's directive.
Mattis had left the door open to some transgender service members continuing to serve during an exchange with reporters at the Pentagon. The Defence Secretary, asked on August 15 if current service members would be ousted, pointed to Dunford's directive.
"The chairman immediately went out and said immediately, 'Everyone stand fast until we get the direction,' " Mattis said. "I understand that this is probably more about your suspicion about what could be coming, but the fact is we have received no direction that would indicate any harm to anybody right now."
The Obama administration repealled its ban on transgender service member serving in July 2016.
A Rand Corp. study commissioned by the Pentagon found that there were between 2500 and 7000 transgender people among the 1.3 million on active duty, but Mattis has questioned whether the study is accurate.