Ministers have ruled out changes to make it easier for trans people to have their gender legally recognised.
They have rejected calls, backed in a 2018 consultation, for people to be able to change their birth certificates without a medical diagnosis.
Ministers said reform of the 2004 Gender Recognition Act was not the “top priority” for transgender people.
Equality campaigners said it was a “missed opportunity” and showed a “shocking failure of leadership”.
But women’s rights groups applauded the decision as a “victory for fairness and common sense”.
Ministers are pledging action to make it easier for trans people to obtain a Gender Recognition Certificate and to improve healthcare services for them.
But LGBT groups had urged them to go much further, by making it easier for people to legally transition from their birth sex and to provide greater protection under the law.
Currently, the Gender Recognition Act requires trans people to go through a long process in order to change their birth certificates.
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A “self-ID” process, allowing changes to birth certificates without a medical diagnosis, was one of the ideas put forward in a consultation undertaken by the last Conservative government, led by Theresa May.
Of the 102,818 responses received, 64% said there should not be a requirement for a diagnosis of gender dysphoria in the future, on the grounds that being trans was neither a medical nor a mental health issue.
But, in a statement, Equalities Minister Liz Truss said she believed the law as it stood provided the right “checks and balances”.
“We want transgender people to be free to live and to prosper in a modern Britain,” she said.
“It is the government’s view that the balance struck in this legislation is correct, in that there are proper checks and balances in the system and also support for people who want to change their legal sex.
“We have also come to understand that gender recognition reform, though supported in the consultation undertaken by the last government, is not the top priority for transgender people.”
She said the 2010 Equality Act, landmark legislation passed towards the end of the last Labour government, “clearly protects” transgender people from discrimination while allowing service providers to restrict access to single sex spaces on the basis of biological sex if there is a clear justification.
Kinder process
The government is pledging to cut the cost and time involved in applying for a Gender Recognition Certificate, making the process “kinder and more straightforward”.
And it is also promising to cut waiting times at NHS gender clinics.
But Stonewall said the “minimal administrative” changes being proposed were totally inadequate.
“While these moves will make the current process less costly and bureaucratic, they don’t go anywhere near far enough toward meaningfully reforming the Act to make it easier for all trans people to go about their daily life,” said the organisation’s chief executive Nancy Kelley.
“Reforming the Act could have brought England and Wales in line with our neighbours in the Republic of Ireland, who have had a de-medicalised, self-determination system for gender recognition since 2015 without any problematic repercussions.”
Fair Play for Women, a group committed to defending the sex-based rights of women, said Ms Truss had made the right decision.
It said the government had “acknowledged women are stakeholders too and policies must fairly balance the conflicting rights of trans people and women”.
“Trans people in the UK have some of the strongest legal protections in the world. That does not change today.”
Last week, the British Medical Association urged the government to allow trans people to receive healthcare and access to gendered spaces in line with the gender they identify with.
