Treatment of psychological problems of 59 children with a physical intersex condition is described. The group consisted of 18 female pseudohermaphrodites with congenital adrenal hyperplasia (CAH), 20 male pseudohermaphrodites and 2 true hermaphrodites born with ambiguous external genitalia assigned the female sex (ambiguous girls), 14 male pseudohermaphrodites born with completely female external genitalia and assigned the female sex (completely female group), and 5 male pseudohermaphrodites born with ambiguous external genitalia and assigned the male sex. Despite the sex assignment, genital organ correction soon after birth, psychological counseling of parents and intensive psychotherapy of the children, general psychopathology developed equally in all 4 groups (39% of total group). Although 87% of the girls with a physical intersex condition developed in line with the assigned sex, 13% developed a gender identity disorder though only 1 girl (2%) failed to accept the assigned sex. Gender identity disorder and deviant gender role were in evidence only in girls with CAH and girls of the ambiguous group. Biological and social factors seem responsible for the development of gender identity disorder, such as pre- and postnatal hormonal influences on the brain enabling deviant gender role behavior to develop, and an inability on the part of parents to accept the sex assignment. A reconsideration of the sex assignment in male pseudohermaphrodites and true hermaphrodites born with ambiguous external genitalia is discussed.