Men and women who have had sex-change operations will be able to marry and adopt children for the first time under a change to the law to be announced in the Queen's Speech on Wednesday.
The Gender Recognition Bill will allow transsexuals to tear up their birth certificates, which record their original sexes, and apply for fresh ones recording their new genders.
The move is expected to be backed in the House of Commons by a majority of MPs but could encounter strong opposition in the Lords from Tory peers and bishops concerned about allowing transsexuals to marry in church.
The Bill will give unprecedented legal rights to the estimated 5,000 transsexuals in Britain, and have far-reaching implications for pension rights and employment law.
But it will mean that a person who married before having a sex change, who later applies for legal recognition of their new gender, will have to divorce, because it is illegal for people of the same sex to be married.
The Queen's Speech will, however, include a draft Bill allowing gay people to have their relationships formally recognised through a civil ceremony.
The Government has also decided not to allow women who become men to inherit titles, such as hereditary peerages, and attached property.
The legislation has the full backing of the Home Office - which began work on the issue under Jack Straw when he was Home Secretary - the Department for Constitutional Affairs, and the Department for Work and Pensions.
Campaigners who have been lobbying for legislation to allow people who have changed their sex to marry legally were jubilant yesterday about the prospect of a Bill. "We have been waiting for over 30 years for this recognition," said Christine Burns of Press for Change. "We are delighted that the Government has decided to act. This will make a huge difference to thousands of people's lives in a practical way."
Under the current law, transsexuals, even those who have had operations on the NHS, are not legally recognised in their new sex and are therefore banned from marrying.
They have also been humiliated in job applications when their change of sex becomes apparent on the presentation of a birth certificate.
Transsexuals had threatened to challenge the status quo under European human rights legislation if the Government failed to act.
The Tories said they would allow a free vote on the Civil Partnerships Bill. Alan Duncan, the only openly gay Tory MP, said that the issue would be "a matter of conscience".
It is not known if Michael Howard, the Tory leader, who voted against lowering the age of gay consent to 16, will back either Bill.
Shaun Woodward, a Labour MP whose sister, Lesley, had a sex change operation, said the new legislation would be "a huge step forward in the area of equality".Reuse content