The World Health Organization (WHO) is in the process of revising the International Statistical Classification of Diseases and Related Health Problems (ICD) and ICD-11 has an anticipated publication date of 2015. The Working Group on the Classification of Sexual Disorders and Sexual Health (WGSDSH) is charged with evaluating clinical and research data to inform the revision of diagnostic categories related to sexuality and gender identity that are currently included in the mental and behavioural disorders chapter of ICD-10, and making initial recommendations regarding whether and how these categories should be represented in the ICD-11. The diagnostic classification of disorders related to (trans)gender identity is an area long characterized by lack of knowledge, misconceptions and controversy. The placement of these categories has shifted over time within both the ICD and the American Psychiatric Association's Diagnostic and Statistical Manual (DSM), reflecting developing views about what to call these diagnoses, what they mean and where to place them. This article reviews several controversies generated by gender identity diagnoses in recent years. In both the ICD-11 and DSM-5 development processes, one challenge has been to find a balance between concerns related to the stigmatization of mental disorders and the need for diagnostic categories that facilitate access to healthcare. In this connection, this article discusses several human rights issues related to gender identity diagnoses, and explores the question of whether affected populations are best served by placement of these categories within the mental disorders section of the classification. The combined stigmatization of being transgender and of having a mental disorder diagnosis creates a doubly burdensome situation for this group, which may contribute adversely to health status and to the attainment and enjoyment of human rights. The ICD-11 Working Group on the Classification of Sexual Disorders and Sexual Health believes it is now appropriate to abandon a psychopathological model of transgender people based on 1940s conceptualizations of sexual deviance and to move towards a model that is (1) more reflective of current scientific evidence and best practices; (2) more responsive to the needs, experience, and human rights of this vulnerable population; and (3) more supportive of the provision of accessible and high-quality healthcare services.