The AFL has ruled that transgender footballer Hannah Mouncey is ineligible to be drafted in Wednesday's AFLW draft. 

It is believed the AFL has knocked back Mouncey's application due to a serious physical disparity that would give her an unfair physical advantage.

Mouncey can still nominate for the AFLW draft in 2019 where she would have to go through a similar process.

Mouncey has represented Australia, as a male, in European handball but has transitioned to a woman over the past two years. 

She starred in Canberra's women's AFL competition in 2017 and nominated for the national draft after her performances attracted interested from several AFLW clubs.

Mouncey has already trialled with Melbourne and Victoria loomed as her most likely destination if she was to be scooped up in the draft.

The AFL has known for months that Mouncey had intended to and then had nominated for the AFLW draft but took until the day before the draft to hand down its verdict. 

Greater Western Sydney Giants midfielder Britt Tully played against 190 centimetre, 100 kilogram ruck prospect Mouncey in the AFL Canberra competition this year 

Tully won AFL Canberra's best and fairest award while playing for the Gungahlin Jets and can't see why the 27-year-old has been denied the chance to play.

"People will have their opinions but I think they're best off keeping that to themselves," Tully said.

"She's just played a season in Canberra so I can't see why anything should change at the elite level. You'd think it would be the other way around if it was an issue."

The AFL follows International Olympic Committee regulations which state an athlete must prove their testosterone level is below 10 nanomoles per litre, a requirement which Mouncey comfortably meets.

Australia's most well-known transgender woman Cate McGregor has previously thrown her support behind Mouncey, and she says the AFL must now brace for legal trouble after she was denied.

The AFL threw its support behind same-sex marriage last month and McGregor said denying Mouncey now would leave the governing body with egg on its face.

More to come