The equalities watchdog has changed its guidance on how schools deal with children who want to change their gender.
Previous guidance from the Equality and Human Rights Commission (EHRC) said that schools would be engaging in "direct gender reassignment discrimination" if they refused to refer to a pupil by their chosen name or gender.
Now The Times reports that the watchdog has updated its guidance to state that schools are no longer automatically breaking the law if they decline to use a pupil's preferred name or gender.
The revised guidance also clarifies that "sex" is binary and "determined by what is recorded on their birth certificate".
Schools must also provide changing rooms for pupils based on their sex at birth, according to the EHRC.
A spokesperson for the EHRC told the newspaper: "It may not be directly discriminatory for a school not to refer to a child by their preferred gender, where it differs from their legal sex.
"However, schools must carefully consider how they justify and consistently apply their policies on this matter to avoid any risk of indirect discrimination."
The changes have been made as schools continue to wait for new government guidelines on how to treat transgender pupils.
The guidelines were supposed to be published over the summer but have been delayed again following disagreements over whether new legislation is needed.
Attorney-General Victoria Prentis has advised the government that banning social transitioning — where children are allowed to choose their gender pronouns and name — would be unlawful.
