The coping strategies of transsexuals who experience discrimination have previously received little research attention. The primary objective of the present study was to generate a grounded theory to explain how transsexuals cope with discrimination. Eight transsexual individuals were interviewed and each interview was audio taped and transcribed in verbatim. The data was qualitatively analysed utilising the grounded theory methodology. Participants collectively described experiencing numerous instances of discrimination and described using a variety of coping strategies to help alleviate anxiety caused by discrimination. The core category of'understanding discrimination to be an anxiety-provoking phenomenon' emerged from the data. It was determined that the core category was established by three pre-existing conditions. The first of these was an awareness of the self to be vulnerable to discrimination. The second condition was an awareness of discrimination to impact negatively on the self, and the third entailed an understanding of why discrimination occurs. The coping strategies were broken into three selective codes. Participants adopted constructive strategies which were primarily rational and realistic. Cognitive coping strategies addressed anxiety caused by discrimination by changing the appraisal of cognitions pertaining to the discriminatory experience. Direct action strategies were behavioural approaches which entailed the altering of the situation. Implications of these findings are discussed in relation to clinicians working with transgendered people, with emphasis on the common occurrence of discrimination and its detrimental impact on the transsexual.