Sex assignment of children born with ambiguous genitalia is a difficult and responsible decision based on limited empirical evidence regarding future development of gender identity/role, sexual orientation, and sexual functioning. Sex of assignment and rearing has appeared to be a prognosticator of future gender identity, usually better than the other criteria of sex (chromosomes, gonadal tissue, prenatal and postnatal hormonal profiles). The decision to assign a sex is guided by the prognosis of the "optimal" sex for the newborn, of which the elements are an overall sex-appropriate appearance with a stable gender identity; good sexual function, preferably combined with reproductive function if attainable; minimal medical procedures; and a reasonably happy life given the limitations. The limited follow-up studies indicate that this is a reasonable policy, although a limited number of subjects will experience gender dysphoria later in life and will cross over to the other sex. This is more often the case in subjects assigned to the female sex with considerable prenatal or postnatal androgen exposure. Children in this predicament must receive guidance well into adulthood. It may be difficult to engage in sexual relations when the anatomy of the genitalia (often operated upon) is not fully normal.