Lawmakers, medical professionals and others had pressed for the change in a document outlining procedures for dealing with disabled service members.
"Homosexuality should not have been characterized as a mental disorder in an appendix of a procedural instruction," Lt. Col. Jeremy Martin, a Defense Department spokesman, said Wednesday. "A clarification will be issued over the next few days."
"Notwithstanding its inclusion, we find no practical impact since that appendix simply listed factors that do not constitute a physical disability, and homosexuality of course does not," he said in a statement.
Called a Defense Department Instruction, the document outlines retirement or other discharge policies for service members with physical disabilities, and in a section on defects lists homosexuality alongside mental retardation and personality disorders.
The Center for the Study of Sexual Minorities in the Military, at the University of California at Santa Barbara, uncovered the document and pointed to it as further proof that the military deserves failing grades for its treatment of gays.
The Pentagon has a "don't ask, don't tell" policy that prohibits the military from inquiring about the sex lives of service members but requires discharges of those who openly acknowledge being gay. There were 726 military members discharged under the policy during the budget year that ended Sept. 30.
The document, was condemned by medical professionals, members of Congress and other experts, including the American Psychiatric Association, which said it declassified homosexuality as a disorder more than 30 years ago.
Members of Congress noted that other Pentagon regulations dealing with mental health do not include homosexuality on any list of psychological disorders. And in a letter to Defense Secretary Donald H. Rumsfeld earlier this month, nine lawmakers asked for a full review of all documents and policies to ensure they reflect that standard.