Many causes for transsexualism have been proposed over the years. As discussed earlier in
Lynn's TG/TS/IS information, it's long been known from intersex data that the genes do not determine gender identity, and recent follow-ups on intersex infant surgeries show that consistency of "genitals and upbringing" does not determine gender identity.
Instead, current scientific results strongly suggest neurobiological origins for transsexualism: Something appears to happen during the in-utero development of the transsexual child's central nervous system (CNS) so that the child is left with innate, strongly perceived cross-gender body feelings and self-perceptions. We still don't know for sure what causes this neurological development, and more research needs to be done. But the neurobiological direction for these explorations seem clear.
Theories of the Causes of Transsexualism