From what I've gathered, the genitalia is “decided” on the first 9 weeks of pregnancy, while the brain only starts developing after about the 9th weeks. By default, w/o testosterone all fetuses starts off as a “female”. For a male baby, any hormonal changes or imbalance may disrupt the brain to develop properly into "male" even if the genitalia has already been formed completely into male (and if the genitalia development is disrupted, this results in intersex characteristic too). And thus, the physically-male baby is born with a mental map of its physical body (akin to how some amputees may experience “phantom limbs” perhaps?), psychology and emotion of a female with a physical body of a male from since they were young. If this is true, a similar mechanism would also exist for FTM Transsexual men, but this may also perhaps explains why there are more MTF Transsexuals than FTM Transsexuals. No doubt what I've proposed isn't proven, but it is palpable IMO -- considering our understanding of how babies are developing in the mother's womb (that is, if I am not mistaken).

Philosophically speaking, the mind dictates “who we are” and not our body. Transsexualism is an inter-sex condition of a brain, and the lack of immediate physical sign does not discount the horrible suffering these individuals experienced with their physical birth defects.