"Adult males who are sexually attracted to females, to both males and females, or to neither sex usually report a history of erotic arousal associated with the thought or image of oneself as a woman (termed autogynephilia)." 
This statement and its supporting literature, that hypothesize sexual deviance as a cause of transsexualism, have sparked dissent among clinicians and researchers and outrage within the transgender and transsexual community [4-8] While theories around "autogynephilia" seem exceptionally impervious to contrary evidence, the controversy has raised questions about tolerance and bias in American Psychiatry- at what point do bad stereotypes preclude good science?
The term "autogynephilia," meaning "love of oneself as a woman," was first introduced by Dr. Raymond Blanchard of the Clarke Institute of Psychiatry, now known as the Centre for Addiction and Mental Health in Toronto. He is currently chairman of the Paraphilias Subcommittee for the upcoming DSM-V. Blanchard stated that,
"All gender dysphoric males who are not sexually oriented toward men are instead sexually oriented toward the thought or image of themselves as women." 
The absolutism in this statement, in the words "all and "instead," seems astonishing.  It reduces a broad continuum of sexuality among transwomen to two narrow maligning stereotypes: either "homosexual males" in denial of a "homosexual" identity or pathological narcissistic "males" sexually attracted to themselves This strict dichotomy stands in contrast to the words of Dr. Alfred Kinsey, the father of modern sexology:
"The world is not divided into sheeps and goats. Not all things are black nor all things white. It is a fundamental of taxonomy that nature rarely deals with discrete categories. Only the human mind invents categories and tries to force facts into separated pigeon-holes. The living world is a continuum in each and every one of its aspects. The sooner we learn this concerning sexual behavior the sooner we shall reach a sound understanding of the realities of sex." 
Although the phenomenon described by "autogynephilia," arousal to thoughts of being women, has been reported in personal narratives by some transwomen,  there is no apparent basis for projecting this stereotype upon all lesbian, bisexual and asexual transwomen. Dr. Blanchard conflates association with causation by using the phrase "erotic arousal in association with the thought or image of themselves as women" interchangeably with "erotically aroused by the thought or image..."  However, "association with" is not the same as "aroused by."
What role do birth-assigned women play in their own sexual fantasies? We would not consider it odd or "fetishistic" for non-trans women to be themselves on the stage of their sex lives. Nor would we assume that they are aroused by their self-image as women rather than by their partners. Why are lesbian and bisexual transwomen treated so differently by American psychiatry and psychology? For transwomen born without female anatomy, incongruence of our bodies with our self-identities pose understandable barriers to sexual expression. The desire to surmount these barriers is more accurately described as an adaptive accommodation to a physiological deficiency. Does the image of a female body "interfere" with normal attractions as Blanchard suggests  or does it enable them?
Dr. Blanchard's studies of clinical patients reporting "erotic arousal in association with cross-dressing" were presented as "fetishistic cases." [15-16] His findings have been criticized by psychologist and community advocate Dr. Madeline Wyndzen as having never been replicated, excluding control groups of birth-assigned women, and for confounding causation with observational data.  For gender dysphoric youth with no access to medical transition procedures, is cross-dressing a "fetishistic" pathology, or is it an adaptive coping strategy to an incongruent body? It seems more plausible that cross-dressing represents an accommodation to conceal or disguise anatomy which poses barriers to lesbian or bisexual expression or fantasy.
Dr. Blanchard's studies omitted control groups of birth-assigned women and the roles that fashion, clothing and lingerie play in their sexual expression and fantasy. For birth-assigned women, sexual expression is accompanied by a $300 billion fashion industry in the U.S.  but without diagnosis of fetishistism or pathology. Dr. Sigmund Freud, however, noted how fashion accompanies sexuality with a metaphorical remark:
"In the world of everyday experience, we can observe that half of humanity must be classed among the clothes fetishists. All women, that is, are clothes fetishists. ... For them clothes take the place of parts of the body, and to wear the same clothes means only to be able to show what the others can show, means only that one can find in her everything that one can expect from women, an assurance which the woman can give only in this form." 
Freud's observations on the role of clothing in the expression of womanhood seem relevant to Blanchard's presumption of "autogynephilic" pathology in transwomen for whom "clothes take the place of parts of the body" - parts that nature did not provide.
What of transwomen who attest attraction to women and frequently are in very long term relationships, partnerships and marriages with women? Blanchard's theory of "autogynephilia," like Dr. Magnus Hirschfeld's "automonosexualism,"  implies that all transwomen not exclusively attracted to men are incapable of genuine attraction to other women.  However, clinical literature has long reported 20 to 30 percent of transsexual women attracted primarily or exclusively to other women [22-23]. These early figures were likely understated, as attraction to women posed barriers to access to hormonal and surgical transition care. Nonclinical surveys report higher rates of same-sex orientation (with regard to affirmed identity, not assigned birth-sex) [24-25] It seems paradoxical that these women are labeled as "autogynephiles" on the basis of their attraction to women, while that very label contradicts the validity of their attraction to women.
How does the "autogynephilia" hypothesis, that "all" transwomen are attracted to men or "instead" to themselves, explain the existence of long-term relationships with other women? Here in Colorado, writer Laurie Cicotello related the story of her remarkable family. In 1997, Ms. Cicotello testified before the Colorado legislature with her father, Dana, a transwoman, educator and advocate respected throughout the transgender community. They spoke in opposition to an anti-gay and lesbian marriage bill that would have threatened her parents' legal same-sex marriage of forty years at the time of this writing. Laurie described how she stood with her parents later that year, hands clasped together over their heads, before fifty-five thousand people at the Denver PrideFest Rally. In a state known in the 90s for religious intolerance of GLBT diversity, Dana proclaimed to the crowd, "I've got your family values, right here!"
Theories of "autogynephilia" not only associate hurtful stereotypes of sexual deviance with transwomen, they presume "erotic anomalies" or self-focused deviance to be the cause of gender dysphoria and the motivation for transition, with both nature and nurture playing secondary roles. Speaking of lesbian, bisexual and asexual transwomen not primarily attracted to men, Dr. Blanchard states:
"This hypothesis asserts that the various discriminable syndromes of non-homosexual gender dysphoria are the results of autogynephilia interacting with additional constitutional or experiential factors." 
Bailey and Triea recently supported this view that "nonhomosexual transsexuals experience erotic arousal at the idea of becoming a woman, and this arousal motivates them to become women."  However, they nor Blanchard offer evidence of a causal relationship between a sexual affinity for one's-self and gender dysphoria (intense distress with one's assigned birth-sex or natal anatomy.) This body of theory seems to proffer the circular reasoning that:
If "autogynephilia" is associated with all lesbian and bisexual transsexual women, then it must be the cause of gender dysphoria for them.
If "autogynephilia" is the cause of gender dysphoria in lesbian and bisexual transsexual women, then all of them must be "autogynephilic."
Proponents of these stereotypes of sexual deviance have not asked the fundamental questions about how gender identity forms in all human beings, transgender and cisgender. They neglect to include control groups of birth-assigned women with their limited, clinical samples of transwomen. They most often neglect to include nonclinical samples of transitioned women living full lives in the real world. They fail to consider the similarities between birth-assigned women and transitioned women of all sexual orientations, similarities so profound that the existence of large numbers of transitioned women remains unacknowledged by psychiatric researchers.  Moreover, the proven efficacy of social and medical transition in relieving the distress of gender dysphoria and improving quality of lives [30-31] remains unexplained by "autogynephilic" theories of etiology.
The corollary of "autogynephilia" theory postulates that straight transwomen attracted to men do not possess female gender identities but are merely gay men in denial. They are branded by Blanchard with a maligning label of "homosexual male transsexuals."  He asserts that straight and lesbian/bisexual/asexual transwomen are so fundamentally different that they represent two entirely distinct "disorders,"
"The feminine gender identity that develops in homosexual males is different from the feminine gender identity that develops in heterosexual males. In other words, homosexual and heterosexual men cannot ''catch'' the same gender identity disorder in the way that homosexual and heterosexual men can both ''catch'' the identical strain of influenza virus. Each class of men is susceptible to its own type of gender identity disorder and only its own type of gender identity disorder." 
Dr. Blanchard's certainty of mutually exclusive transsexual types based on sexual orientation seems peculiar within sexology, where both gender identity  and sexual orientation  have long been viewed as continuous rather than dichotomous. He based this assumption on differences in "a history of erotic arousal in association with cross-dressing," in ages of presentation for "professional help," and in "degrees of childhood femininity" within clinical populations. Correlating these attributes to the lack or presence of attraction to males, Blanchard concluded that "the main varieties of nonhomosexual gender dysphoria are more similar to each other than any of them is to the homosexual type."  However, a recent study of gender-dysphoric MTF subjects reported no significant difference in scores on a gender identity/gender dysphoria questionnaire with regard to sexual orientation.  This result is not explained by Blanchard's assumption of fundamentally different gender identities.
Blanchard's analogy of gender variant identities to communicable disease is offensive and perhaps demonstrative of bias. His research does not consider the shame and guilt that force gender dysphoric youth and adults into the closet, often for decades. For example, "degrees of childhood femininity" may indicate degrees of closeted self-expression far more than innate femininity. The doctrine of "autogynephilic" dichotomy neglects different social pressures faced by gender dysphoric youth and adults, based on their sexual orientations. These differences in social oppression would certainly impact their ability to emerge from the closet and express their inner identities.
Inferring gender identity based on age of clinical presentation is especially troubling, given Zucker and Bradley's observation that gender variant youth are "invariably" referred by adults and not by themselves.  Admission to clinics that practice gender-reparative therapy (attempting to change one's gender identity or espression) may well indicate parental intolerance rather than gender identity per se. For MTF youth, dates of clinical presentation may likely signify the dates they were caught by their parents in their sisters' clothes and little more. For any closeted population, it is wrong to confuse "onset" with presentation to a mental institution or clinic.
For straight transwomen attracted to men, Dr. Blanchard states that all "homosexual gender dysphorics are sufficiently similar to be treated as one diagnostic group."  The statement makes clear the intent of "homosexual gender dysphorics" as a term of mental disorder. However the theory that attraction to men is the sole motivation for transition does not explain why the vast majority of gay males do not transition. It does not explain very low rates of surgical regrets for transwomen, with and without partners or spouses. Nor does it explain very young children who are painfully distressed with their assigned birth-sex or why some transition years before adolescence. What then would differentiate straight transwomen and girls from gay males, if gender dysphoria is hypothesized to exclude any innate sense of gender identity?
Perhaps the model of "homosexual gender dysphoria" assumes that living as transsexual women is somehow socially advantageous to living as gay men. To the contrary, gay men possess greater social status, economic privilege and civil rights protection than transwomen in the U.S. and much of the world. For example, 20 states currently prohibit workplace discrimination based on sexual orientation, while only 12 include protection based on gender identity. 88 percent of U.S. Fortune 500 employers prohibit discrimination based on sexual orientation versus 25 percent that include gender identity.  It seems farfetched that "all" straight transwomen who forfeit social status to transition would be driven only by attraction to men.
For full citations, please visit Dr. Kelley Winters's site, GID Reform.