These children are not intersex -- they do not have a physical disorder or malformation of their sexual organs. The gender issue exists in the brain, though experts do not agree on whether it's psychologically or physiologically based.
Many transgender people report feeling discomfort with their gender as early as they can remember.
Gender identity is often confused with sexual orientation. The difference is that "gender identity is who you are, and sexual orientation is who you want to have sex with," said Dr. Johanna Olson, a professor of clinical pediatrics at the University of Southern California, who treats transgender children.
Children around age 3 are probably not interested in sexual orientation, she said. But experts say some children who look like they will be transgender in early childhood turn out to be gay, lesbian or bisexual.
Differences in schools
School policies toward transgender students vary across the United States.
In New York, for example, the law says students can't be discriminated against on the basis of their gender identity.
But in Maine, a court ruled in November that a school district did not violate a transgender student's rights when she was told she couldn't use the girls' bathroom.
Dude, the Colorado school district's attorney, has said there is nothing in that state requiring public schools to permit transgender students to use restrooms intended for the gender with which they identify.
He added that the Fountain-Fort Carson School District adheres to the Colorado Anti-Discrimination Act in all respects: "Coy attends class as all other students, is permitted to wear girls' clothes and is referred to as the parents have requested."
She also has easy access to bathrooms other than the girls', Dude said.
Coy's case will be the first to challenge a restroom restriction under the state's anti-discrimination act, the Transgender Legal Defense and Education Fund said.
For now, the first-grader is being home-schooled.
Reaction to Coy's story
CNN's online audience has responded to this story with a range of questions and comments, with many saying the child is too young to comprehend gender differences. Mostly, posters said they felt sorrow for Coy as a child who is struggling.
"Just let the kid use the gender-neutral bathrooms. When he/she is a teen, if he is still convinced he is a girl, maybe then you can get into it with the school," said commenter EDM.
"This kid is going to have a hard enough life if he really is transsexual, why start fighting battles now, when he should just be blissfully ignorant"?
Commenter AlawJ said the story left a "negative impression of the parents."
"My rash view may be unfair, but I remember being that age and have helped raise 9 nieces and nephews. One wanted to be a firetruck and ran around making truck noises. Another one of the boys liked to play dress up with the girls," AlawJ wrote. "My fiance's little brother always wore dresses as well. But, at the end of the day, the parents are there to be the adults and make decisions for them.
"I also am a little weary when you read a story where the parents are filing lawsuits for their 6 year old child's rights."
Editor's note: A previous version of this story quoted certain reader comments that were harshly critical of Coy's parents. We removed these comments because we decided they did not increase understanding of this complex and personal issue.