The new policy "acknowledges a competitive difference in the male and female categories and the disadvantages this presents in elite head-to-head competition", they added.
Eligibility criteria will consist of evidence that the prior physical development of the athlete as a male, as mitigated by any medical intervention, does not give the athlete a competitive advantage over the athlete's cisgender female competitors.
USA Swimming said data showed that the top-ranked female athlete in 2021 would rank below 563rd on male events in 2021.
It follows controversy after a transgender athlete from the University of Pennsylvania broke swimming records, dividing athletes and fans.
Lia Thomas qualified for the National Collegiate Athletic Association (NCAA) championships after beating the next best swimmer by a record 38 seconds at a competition in Ohio last year - around a full lap.
She competed on the men's team for two seasons before transitioning.
Thomas could be prevented from competing because she began transitioning 32 months ago.
She will have to disclose the concentration of testosterone in her blood to be cleared to participate.
A biological female will have 0.5-2.5 nanomoles of testosterone per litre of blood, while a biological male will have 10-35.
On Tuesday athletes from the University of Pennsylvania, women's swimming and diving team backed Thomas in a statement.
"We value her as a person, teammate, and friend," they said. "The sentiments put forward by an anonymous member of our team are not representative of the feelings, values, and opinions of the entire Penn team, composed of 39 women with diverse backgrounds."
However, her staggering success has drawn criticism.
The Independent Women's Law Center (IWLC) and Independent Women's Forum (IWF) said on Tuesday that the decision was unfair and prioritised "transgender inclusion over equal opportunity for female athletes".
"In so doing, USA Swimming joins the NCAA in putting female athletes last," it added.
According to the body, the focus on testosterone is limited because it puts aside the years of biological advancement from male hormones, including height.
Transgender former athlete Caitlyn Jenner also said she did not support the NCAA.
"Her hands are bigger. She can swim faster. That's a known," she said.
"All of this is woke world that we're living in right now is not working. I feel sorry for the other athletes that are out there, especially at Penn or anyone she's competing against, because in the woke world you have to say, 'Oh my gosh, this is great.' No it's not."
Last November the International Olympic Committee (IOC) released its guidelines relating to transgender competitors but did not outline specifics.
They said no athlete should be barred from participating based on "unverified, alleged or perceived unfair competitive advantage due to their sex variations, physical appearance and/or transgender status".
"Athletes should be allowed to compete but unfair advantage needs to be regulated."
