Corrections Minister Anne Tolley says she does not support changing the law to allow some transgender inmates to serve their terms in women's prisons.
A report by the Chief Ombudsman released last month criticised the practice of placing transgender prisoners in prison according to birth gender unless they have completed gender reassignment surgery.
A gay rights lobby group, Rainbow Wellington, endorses the report and says transgender inmates should take a case to the Human Rights Commission.
In a letter to the group, Ms Tolley says placing anatomically male transgender prisoners in a women's prison would put them at risk of violence, as female inmates might feel threatened.
The Department of Corrections says there are three transgender prisoners out of a total muster of 8500.
