Bovet, who is running for a council seat in the Plateau-Mont-Royal borough, admitted to providing sexual services in her apartment to clients she found on the internet.
Joly said she was aware of her candidate's past, and had a long discussion with Bovet before taking her on the team.
Joly said Bovet explained she had worked in the sex trade in order to help pay for a sex change operation.
"For me, it would have been much easier to drop my candidate... and to say, ‘yes, indeed I made a mistake when I accepted this person into the party,'" said Joly.
"But the truth is that she has my support. She has the support of the entire team, and Bibiane Bovet will represent her fellow citizens."
Joly said she wanted Bovet to become Montreal's first transsexual city councillor.
“Why not? Why not take on a candidate with a difficult past who had managed to turn her life around,” said Joly.
Joly said that as far as she knows, Bovet never broke any laws, because prostitution is technically legal in Canada.
When asked about whether Bovet filed taxes for the “therapeutic massage services” she offered, Joly said she had confidence her candidate had obeyed the law.
"Ms. Bovet, to my knowledge, has always followed the law... and she has my full confidence. What I know is that Ms. Bovet no longer operates an escort service, and she is committed to removing all doubt."
Mayoralty candidate Marcel Côté was critical of his opponent.
"It reflects a side of Joly's organization that is a little amateurish and inexperienced, which is also well reflected in her platform. When scratching the surface, we discover that she's inexperienced," said Côté.
Joly says the criticism over Bovet's candidacy is part of a smear campaign.