The NSW coalition says the wide-ranging equality bill is going "too far, too quickly", citing internal concerns about women's safety once transgender people could more easily change the sex listed on their birth certificate.
The controversial stance was opposed by some moderates inside the Liberal party, including one who's willing to cross the floor, and comes ahead of a crucial by-election on Saturday.
The fracas over transgender rights follows a civil war among Victorian Liberals sparked by an MP's involvement in a trans-critical event and the controversial selection of Katherine Deves as a candidate in the 2022 federal election.
The man tipped as Queensland's next premier, LNP leader David Crisafulli, has also faced calls to clarify his stance on gender issues after a party official claimed the state had been "captured by transgender ideology".
The NSW bill would create a new domestic violence offence for threatening to "out" people and allow courts to make a parentage order for a child born through international commercial surrogacy.
It would also allow people to change their registered sex without requiring surgery to female, male or other descriptors - in line with other states.
Standing alongside faith leaders and a Labor-voting gay feminist, shadow attorney-general Alister Henskens and his deputy Susan Carter on Wednesday said the bill went "too far, too quickly".
The birth certificate provision threatened women's safety by allowing male-born people into women's only spaces such as single-sex prisons "with the flick of a pen", Ms Carter claimed.
NSW shadow attorney-general Alister Henskens says the bill goes "too far, too quickly". (Bianca De Marchi/AAP PHOTOS)
"This is not about equality," she said.
"This is about jeopardising safe spaces for women."
She was backed by the Hindu representative of the government's Faith Affairs Council, senior Anglican bishop Matthew Stead, and lesbian rights groups.
Irreligious Labor-voting lesbian Bronwyn Winter said she felt strange aligning with faith groups and the political right but she was concerned men "with all their tackle" would be able to falsify birth certificates to enter lesbian spaces.
NSW Liberal MP Felicity Wilson, however, stuck her neck out to dismiss her party's concerns.
"Those who claim it will create risk for women are fearmongering," the moderate MP said.
"Women are too often unsafe in our society but, in all my life, I have never been asked to show my birth certificate to enter a bathroom or a sports change room."
The change will make "a very big difference for quite a small number of people", Penny Sharpe says. (Mick Tsikas/AAP PHOTOS)
The bill is expected to pass the lower house on Wednesday but faces a more challenging path in the upper house, which has an equal number of left and right-wing MPs.
Labor's upper house leader Penny Sharpe said NSW would become a safer, more inclusive place for the LGBTQI community.
"We believe that this change will make a very big difference for quite a small number of people, but it's a change that's absolutely worth making," she said.
Independent Alex Greenwich, who drafted the laws, said birth certificates were living documents that should properly reflect a person's gender without the need for genital surgery.
"It means absolutely nothing other than to the person who has it," he said.
"I would have thought the Liberal party learned their lesson from Katherine Deves and the appalling results she received in the Warringah election by focusing her entire campaign against the trans community."
Ms Deves's 2022 run in ex-prime minister Tony Abbott's former Sydney seat of Warringah ended badly, leaving incumbent teal independent Zali Steggall with an increased margin.
14°C