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The new policy doesn't force transgender athletes to explain their gender identity to play on sports teams that better fit their identity.
Trans athletes in New Zealand will now be able to play in community sports in their self-declared identity.
Governing body Sport New Zealand made the announcement Tuesday.
Athletes will not need to provide proof or explanation about their gender identity, according to Reuters.
Elite sports will still be left up to the individual sports' bodies to define how transgender athletes participate, Sport New Zealand said.
"An inclusive transgender policy allows individuals to take part as their self-determined gender and not as the sex they were assigned at birth," the sports body said. "It does not ask people to prove or otherwise justify their gender, sex, or gender identity."
New Zealand's Laurel Hubbard became the first trans woman and first transgender athlete to compete in the Olympic games when she competed in weightlifting in Tokyo in 2021.
The governing body said that it was important for their inclusive practices in community sports. Guidelines also recommend doing away with gender-specific uniforms and making them available for different body types.
Transgender athletes have been made a target by policies the world over in recent years.
In the U.S. a number of states have barred trans girls from participating in girls' sports. This year, conservative commenters and politicians spoke out against trans swimmer Lia Thomas's achievements during her time at the University of Pennsylvania.
Critics say trans women have an unfair advantage in sports, though advocates for trans participation disagree.
