The law goes into effect Jan. 1, and its goal is to reduce discrimination against transgender students from the age they enter school to the age they graduate secondary school.
Critics argue the law violates the privacy of non-transgender students.
One of the law's provisions allows transgender students to choose which restroom that want to use. It also gives them the choice of playing on either boys' or girls' sports teams.
To qualify, at least 505,000 valid signatures must be submitted. The signatures must be reviewed, and if there are still enough to qualify, the initiative would qualify for the ballot.
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John O'Connor, executive director of Equality California, the organisation that co-sponsored the transgender student law, said he was alarmed by the initiative effort.
"Protecting this law is our number one priority, and we will put everything we've got into it," O'Connor said, adding that he believes public opinion is opposed to discrimination against LGBT or lesbian, gay, bisexual and transgender people.
"It shows the degree of opposition that exists to opening the most vulnerable areas of public schools to the opposite sex," Karen England of Capitol Resources Institute, a coalition member, said in a statement.