from an article by dick swabb, a professor of neurobiology at the university of amsterdam:

Sexual differentiation of our genitalia occurs in the first few months of pregnancy while sexual differentiation of the brain takes place in the second half of pregnancy. As these two processes occur at different times, it is theorised that in transsexuality these processes are influenced independently of each other.
…
Everything indicates that during the early stages of development, the sexual differentiation of the brain occurs atypically in transsexuals, and not that they are “simply” psychotic, as a psychiatrist from Limburg recently dared to assert.

i’m not thrilled with some of the wording in the article, as in “Transsexuals are convinced that they were born in the body of the opposite gender…”, but it was an interesting read,