'She was our first child," recalls Sarah (not her real name), a mother of two who lives in the south of England. "But from age three we knew something was wrong. She was very introverted, isolated. When she started school at four she came home and said she was a freak. It seemed a strange word for a four-year-old to use. She was always quite a sad little person."

Sarah's daughter was born and grew up as a boy. Now 19, she is far happier in a woman's body as a post-operative transsexual. It took two years for the family to get used to calling her "she". Her mother says her daughter experienced her childhood as mental torture, especially during puberty. "Looking back, we could never find any tape in the house. It was because she was taping her genitals up every day. She said to us later that she thought it would all go right for her at puberty, that her willy would drop off and she would grow breasts. She said she was going completely crazy because she knew in her head that she was a girl."

One day, when her daughter was 14, Sarah walked in on her in her bedroom. "She was there in front of the mirror with her genitals tucked away. She was very embarrassed. I said, 'I don't know what's happening here but if you want to talk to me, you can.' About 10 minutes later she came and lay on the bed next to me and said, 'I want to be a girl. I'm not a boy. My body is wrong. Everything is wrong.'" For Sarah, this was more than shocking: "I had watched programmes on transgender, I'm very interested in people, it's part of who I am to find out about these things ... But you never imagine it's going to happen to you."

Sarah sought help from her GP - who laughed. Eventually, her daughter got a referral to the one London clinic that deals with gender identity disorder in children and adolescents. But obtaining treatment on the NHS in her daughter's mid-teens was slow and difficult. Several suicide attempts followed and the family remortgaged their house to pay for private hormone treatment. Once Sarah's daughter was 18, they also paid for an operation abroad.

The plight of children with gender identity disorder has made headlines this year. In February an inquest was held into the death of Cameron McWilliams, a 10-year-old boy from Doncaster, who hanged himself. The court heard that he had asked permission to wear makeup and girls' underwear. "It was apparent he was unhappy and said he wanted to be a girl," his mother said. "He did like girls' things." Later the same month Lawrence King, 15, from Oxnard, California, who described himself as "gender non-conforming" and was a victim of school bullying, was shot to death in a science laboratory by another pupil.

Internationally, there is controversy over medical treatments that could be used to help children in this situation. In May, Dr Norman Spack, the US's leading authority on "gender-confused" children and a paediatric endocrinologist at the Children's Hospital in Boston, revealed on US National Public Radio that he has at least 10 paediatric transgendered patients who are receiving puberty-blocking hormone treatment. He says that the procedures allow children to buy time to make a decision about gender reassignment surgery. Once they have gone through puberty - and fully developed the body of the gender they don't want - it is much more difficult.

Awareness of transgender children is growing. Earlier this year a book called The Transgender Child: A Handbook for Families and Professionals (Cleis Press) was published. "Thousands of families face raising children who step outside the pink or blue box," says the blurb.

But their stories rarely cross into the mainstream because families don't want their children to be identified. Even adult transsexuals risk ridicule (and sometimes physical abuse) when talking about their past. The Oprah Winfrey Show first featured an 11-year-old girl who wanted surgery to become a boy in 2004. Last year, a very cute six-year-old girl, Jazz, appeared on the Barbara Walters show in the US. She had been born as a boy but she identified so strongly as a girl that her parents decided to let her be who she wanted to be. She and her parents appeared on television under assumed names. "We'll say things like, 'You're special. God made you special.' Because there aren't very many little girls out there that have a penis," said her mother Renee. They were comfortable with identifying their child as transgender.

Gender issues can appear as young as four (although the parents of the aforementioned Jazz insist that their son made it clear he wanted to wear a dress from the age of 18 months). "It usually becomes more evident when they go to school," says Simona Giordano, a senior lecturer in ethics and psychiatry at the University of Manchester who is conducting an international study into gender identity in children. "There have been reported cases of kids who won't drink for the duration of the school day so that they don't have to go to the toilet, and who don't want to sleep in a bedroom with their peers."

In Britain, there is only one place where children who feel this way can be treated: the Gender Identity Development Service at the Tavistock and Portman NHS Foundation Trust in London, run by Dr Domenico di Ceglie, author of a 1998 ground-breaking study on transgender children, A Stranger in My Own Body: Atypical Gender Identity Development and Mental Health (Carnac). He became aware of the needs of the children with gender-identity issues when working as a child psychiatrist in Croydon in the 1980s. His colleague Polly Carmichael, a consultant psychiatrist, explains: "We get 60 to 80 referrals a year and our referrals are going up. We see children from as young as six up to aged 18."

Not every child diagnosed will go on to have gender reassignment surgery. Ultimately, about a quarter do. Others may experience discomfort about their gender for reasons connected to traumatic events in their life. In Di Ceglie's case notes, he recalls the story of a five-year-old boy whose grandmother died. She had been his main carer. He identified with her so strongly that after her death he began to play with dolls, dress up in his mother's clothes and play wedding games, in which he was always the bride. Once he had counselling and was able to express his grief about losing his grandmother, his behaviour changed.

Linda (also not her real name) is the mother of a child who experienced gender identity disorder and now helps run Mermaids, which was set up in 1994 and remains the only UK support group for children with gender identity disorder. (Pete Burns raised funds for the organisation when he appeared on Celebrity Big Brother in 2006.) It has some members as young as seven and a special mailing list for adolescents aged 12 to 19.

Linda receives a couple of inquiries a week: "We get a lot of calls from parents who have five- to nine-year-olds. There seem to be more boys than girls affected at that age," she says, "Which is probably because it's more acceptable for girls to be tomboys. If you have a little girl who wants to cut her hair short or play football, that is seen as normal. But if you have a boy who wants to draw mermaids or dress up as a princess, they get made fun of." Once puberty hits, the numbers even out and there are as many girls as boys seeking help. For some children, it is a passing phase, she says. "For others it is likely to go on for some years and will cause a lot of problems." This is something of an understatement.

A conference to discuss gender identity disorder in adolescents will be held in October at the Royal Society of Medicine. Some parents whose children have gender identity issues are already angry about the fact that few professionals have been invited from abroad. They see the UK as lagging behind developments in other countries. Treatment centres in Australia, Belgium, Canada, Germany, Norway, the Netherlands and the US all offer medication to suspend puberty. Not enough is known about this in the UK, according to the Gender Identity Research and Education Society (Gires), and only two of the 15 presenters at the conference are from overseas.

Terry Reed, a trustee at Gires and the mother of a transgender adult, says that many British specialists are "transphobic". "As far as they're concerned, a trans outcome is bad. They are hoping that during puberty the natural hormones themselves will act on the brain to 'cure' these trans teenagers. What we do know is what happens if you don't offer hormone blockers. You are stuck with unwanted secondary sex characteristics in the long term and in the short term these teenagers end up suicidal."

Reed has a transsexual daughter who had reassignment surgery at the age of 19. "The only indication I did have when she was a child was that she showed an interest in female clothing - not wearing it, but just having some in her room. I said, 'You mustn't take your sister's clothes,' and then forgot about it. I was completely amazed, shocked and frightened when I did find out some years later what was happening. But I have always felt that people have a right to be who they are. I felt that whoever this person was, I was her parent and I wanted to support her." She and her husband set up Gires in 1997: "We have run 11 family workshops and seen over 200 individuals in family situations. I like to think that we have helped an enormous number of people to get over that first shock of rejection and, sadly, sometimes, revulsion."

Part of the organisation's mission is to break down resistance to the idea that gender identity confusion is a problem. "We call it gender variance - not gender identity disorder," explains Reed, "because that is pathologising it." She also wishes people would understand that it is not something transgender people choose. "When you live with it, it is so obvious and so extreme. Some of these children are saying from a very early age, 'This is what I am. Why doesn't anyone understand that my name is Bob and I am not a girl.' Sometimes it's as soon as they can talk - at age two or three."

But Gires' current fight is to make the puberty-blocking drugs more available to this minority of desperate children who, they argue, show obvious signs of needing them. At present, these drugs are usually prescribed at 16 at the earliest in the UK (in the Netherlands, for example, they are given as young as 12 or 13). Dr Giordano says: "The UK stance on puberty-suppressing drugs is completely unreasonable. In other countries they are provided as soon as puberty has commenced. But obtaining this treatment - which suppresses oestrogen in girls and testosterone in boys - is very difficult in this country." From the late 1990s the Dutch have been monitoring a group of around 350 adolescents with "gender divergent identity": a small number of these have had access to puberty-suppressing drugs and are planning to go on for surgery. In Dr Giordano's opinion these drugs are safe: "It is a temporary, reversible intervention. If the child changes their mind, they can be interrupted. They are entirely benign with no known side effects."

Parents who want the puberty-blocking treatment argue that their children's lives are at risk if they don't get it. Some are already seeking help abroad. Although some doctors are concerned that the complicating factor with gender identity disorder is that it shows up in different ways in every individual, advocates of the treatment say it is possible to draw up clear guidelines so that the right people are identified early and quickly. Giordano explains: "At puberty the problem becomes more distressing." Once transgender children start going through puberty and acquire secondary sex characteristics, their reassignment surgery will be much more complicated - and less likely to be wholly satisfactory. There is a challenge in identifying those who need treatment, she concedes, "but there are cases that are very clear where the disorder is strong and persistent".

Dr Carmichael of the Gender Identity Development Service argues that the Dutch trial is far from complete. "The Dutch data looks promising. But they have not been doing it for so many years that you have long-term follow-up.The data is not over a long enough period of time and that concerns endocrinologists." There is also concern in the medical comm-unity that not enough evidence exists on the effects of puberty-blocking treatment on bone mass or on the brain. "The question is, if you halt your own sex hormones so that your brain is not experiencing puberty, are you in some way altering the course of nature?"

There is also fierce debate about the origin of gender identity disorder. Understandably, many parents of transgender children, as well as many transsexual adults, are convinced it is innate. Studies such as The Praeger Handbook of Transsexuality by Rachel Ann Heath (Greenwood) explore a potential biological basis for the condition. Others are yet to be convinced. "There is a small amount of evidence for differences in the brain," says Dr Carmichael. "That is a very interesting finding but it is not robust enough to say that it is definitely the only reason and that it is an innate condition. It is most likely multifactorial." She acknowledges, however, the strength of feeling that these children experience: "Feelings are very intense and it is very difficult for families and young people to cope with the uncertainty. They are very strong in their conviction that they are in the wrong body."

Because of the misunderstanding and stigma surrounding gender identity, children are often horrifically bullied, even in their own families. Another of Di Ceglie's case studies is Mark, 16. He identified as a girl from the age of three. At the age of seven, he was raped by his father - which confirmed his belief that he was female. He has just gone into therapy. The doctor advised waiting until he was 18 to decide on a course of action.

When Sarah's daughter started dressing as a girl for the first time at the age of 16 on her walk to school, people would shout from their cars: "Girl with a cock!", "Tranny!" and "Man-beast!". "At her school they were shocked but they were wonderful," remembers Sarah. "It was explained to all the year groups that it was a condition and not a choice. They explained the effect it had on her and that bullying would not be tolerated. The kids were great. It was the parents saying they didn't want a freak in school with their child."

Sarah believes that anyone watching a teenager go through this process would want them to have the drugs as soon as possible. Her daughter was denied them until the age of 16, by which point she already had an adam's apple, a deep voice and facial hair. She understands all this is hard for people to take in; at the age of 11 her second child had to process the fact that his brother was becoming his sister. Family friends still forget what has happened and ask, "How are the boys?" "It takes a long, long time to come to terms with. It took us about two years to stop crying for our loss and also for the pain that we knew our child was going to have to go through. No one would choose this. It's too hard. I've asked my daughter, 'If this condition was known about in 1989 when I was pregnant and there was an option to have a termination, would you have wanted me to?' She said yes. And I agree. If I had known what it would be like for her, I would have done it. That's how bad it is."

Her daughter eventually got the outcome that felt right - but she is still getting over the events of the last six years. "She is still young and everything is raw for her. She hates the label 'transsexual'. She is just a girl who happened to need the surgery to make her genitals right".

· Mermaids: Family Support Group for Children and Teenagers with Gender Identity Issues can be reached at mermaids.freeuk.com

· The Gender Identity Research and Education Society is at gires.org.uk