BACKGROUND: The conceptualisation of transgender identity as a mental disorder has contributed to precarious legal status, human rights violations, and barriers to appropriate health care among transgender people. The proposed reconceptualisation of categories related to transgender identity in WHO's forthcoming International Classification of Diseases (ICD)-11 removes categories related to transgender identity from the classification of mental disorders, in part based on the idea that these conditions do not satisfy the definitional requirements of mental disorders. We aimed to determine whether distress and impairment, considered essential characteristics of mental disorders, could be explained by experiences of social rejection and violence rather than being inherent features of transgender identity, and to examine the applicability of other elements of the proposed ICD-11 diagnostic guidelines. METHODS: This field study used a retrospective interview design in a purposive sample of transgender adults (aged >18 years or older) receiving health-care services at the Condesa Specialised Clinic in Mexico City, Mexico. Participants completed a detailed structured interview focusing on sociodemographic characteristics, medical history related to gender identity, and, during a specific period of adolescence, key concepts related to gender identity diagnoses as proposed for ICD-11 and from DSM-5 and ICD-10, psychological distress, functional impairment, social rejection, and violence. Data were analysed with descriptive statistics and univariate comparisons and multivariate logistic regression models predicting distress and dysfunction. FINDINGS: Between April 1, 2014, and Aug 17, 2014, 260 transgender adults were approached and 250 were enrolled in the study and completed the interview. Most (n=202 [81%]) had been assigned a male sex at birth. Participants reported first awareness of transgender identity at a mean age of 5·6 years (SD 2·5, range 2-17), and 184 (74%) had used health interventions for body transformation, most commonly hormones (182 [73%)], with the first such intervention at a mean age of 25·0 years (SD 9·1, range 10-54). 84 (46%) of those who had used hormones did so initially without medical supervision. During adolescence, distress related to gender identity was very common, but not universal (n=208 [83%]), and average level of distress was quite high among those who reported it (79·9 on a scale of 0 [none at all] to 100 [extreme], SD 20·7, range 20-100). Most participants (n=226 [90%] reported experiencing family, social, or work or scholastic dysfunction related to their gender identity, but this was typically moderate (on a scale of 0 [not at all disrupted] to 10 [extremely disrupted], family dysfunction mean 5·3 [SD 3·9, range 0-10]; social dysfunction mean 5·0 [SD 3·8, range 0-10]; work or scholastic dysfunction mean 4·8 [SD 3·6, range 0-10]). Multivariate logistic regression models indicated that distress and all types of dysfunction were strongly predicted by experiences of social rejection (odds ratios [ORs] 2·29-8·15) and violence (1·99-3·99). A current male gender identity also predicted distress (OR 3·90). Of the indicators of gender incongruence, only asking to be treated as a different gender was a significant predictor, and only of work or scholastic dysfunction (OR 1·82). INTERPRETATION: This study provides additional support for classifying health-related categories related to transgender identity outside the classification of mental disorders in the ICD-11. The reconceptualisation and related reclassification of transgender-related health conditions in the ICD-11 could serve as a useful instrument in the discussion of public health policies aimed at increasing access to appropriate services and reducing the victimisation of transgender people. FUNDING: National Institute of Psychiatry Ramón de la Fuente Muñiz, Mexico.