The transgendered contestant had already successfully reached the finals in the Miss Vancouver pageant before she was banned from continuing in the competition.
Although the pageant organizers described Talackova as a "real girl" they disqualified her arguing that the rules state that each contestant must be a "naturally born female."
Talackova began hormone therapy at 14 and underwent sexual reassignment surgery at 19.
She was listed on the official Miss Universe Canada website as a contestant until it was discovered that she was transgender. The organisation removed her profile.
"I'm disqualified, however I'm not giving up," tweeted Talackova, who later locked her Twitter account.
"I'm not going to just let them disqualify me over discrimination."
She added that she had been "disqualified for being born.".
Denis Davila, national director of Miss Universe Canada, said Talackova claimed on her registration form she was born a female.
Davila became suspicious and confronted Talackova about her sex change and the contestant admitted she was born a male.
"She feels like a real girl and she is a real girl. She didn’t expect people to question it," Davila website thestar.
"She was hoping we could put her back in the competition, but the rules are very clear and there’s no way we can go back on it."
The decision from the Miss Universe Canada pageant sparked outrage with people calling for Talackova to be reinstated into the contest.
People took to social media pages to express their disgust with one Facebook user writing on the pageant's page: "Tell us what 'requirements' did she not make? This reeks of discrimination..."
In a YouTube interview Talackova says she knew she was a female at the age of four and began hormone therapy ten years later. She has competed in transgender pageants before.
"I regard myself as a woman with a history," Talackova says winking to the camera in the video.
A statement from Miss Universe Canada read: "Jenna Talackova from Vancouver, British Columbia will not compete in the 2012 Miss Universe Canada competition because she did not meet the requirements to compete despite having stated otherwise on her entry form.
"We do, however, respect her goals, determination and wish her the best."