The pageant's New York-based parent backed the decision.
"After review, organizers discovered that Jenna Talackova falsified her application and did not meet the necessary requirements to compete in the 2012 Miss Universe Canada pageant," a statement said.
The disqualification has won Talackova widespread sympathy and raised the question of whether the pageant has the right to decide who is female.
Talackova is obtaining legal counsel and is expected to make a statement next week, said her spokesman, Rory Richards.
Her change of gender was hardly a secret before the event because she had competed in the 2010 Tiffany Miss International Queen Competition for transgendered and transsexual women in Pattaya, Thailand. In a video interview for that pageant, she said she had lived her life as a female since age 4, began hormone therapy at 14 and changed sex at 19.
"I regard myself as a woman with a history," she said.
Connie McNaughton, Miss World Canada in 1984 and first runner-up for the world crown, called the decision outdated and discriminatory.
Some countries have their candidates undergo cosmetic surgery, she said, so what's wrong with sex-change surgery "because in your heart and soul you believe yourself to be a woman?"
A Vancouver transgendered activist, Jamie Lee Hamilton, said Talackova could sue for violation of her human rights.
"She was born with male genitalia and is being treated as a second-class citizen," Hamilton said. "Under the eyes of the law and the medical profession, she's a legal female."
Prof. Patrizia Gentile of Ottawa's Carleton University, who did a dissertation on beauty pageants, equated the ban with the exclusion of blacks and Jews from pageants in earlier times. "We're seeing more and more transgendered women wanting to be beauty contestants," she said. "The rule is incongruent with the culture."
Besides, she said, "Your genitalia have nothing to do with how you perform femininity."
Prof. Kathleen Lahey, a gender issues expert at Queen's University in Kingston, Ontario, said the organizers are looking at the issue wrongly; "If the organizers were being honest, they would recognize that this particular competitor was perhaps one of their most brilliant competitors ever to make it into the finals having performed the female gender so very well."
Spencer Chandra Herbert is among members of the British Columbia provincial legislature who are pushing legislation to guarantee equal rights in the area of gender identity. He said Talackova's exclusion shows how misunderstood the subject is.
"She may have had male bits when she was born but she's a female," he said. "I think Donald Trump and his Miss Universe contest need to get into the current century and get in line with the current science and respect that."
Trump's office said he was not commenting on the matter.
From the conservative side of Canadian society, Gwen Landolt, national vice president of REAL Women of Canada, said the pageant was simply being realistic in barring Talackova.
"Even though she had surgery and hormones, her DNA is still that of a man, his reproductive system is still that of a man," Landolt said.
"To consider yourself Miss Universe is to actually ask for more pain, suffering and rejection," Landolt said. "I'm sorry this person has put himself (or) herself though this."
- AP