Manoj Shahi, who is identified as 'Monica', became the first person in Nepal to receive a passport under the 'O' (Other) category.
Rewati Poudel, director at the Department of Passports, handed the passport to Shahi today.
Shahi hoped this milestone would provide momentum to the Lesbian-Gay-Bisexual-Transgender-Intersex (LGBTI) movement in Nepal and would pave way for better reforms.
"Today is an important day in my life and I hope the younger generation is encouraged by the move," said Shahi.
Australia and New Zealand are the only two countries in the world that issue passports with 'x' as an option for people who do not identify as male or female.
Earlier this year, Nepal had amended its passport regulations, allowing 'other' as one of the gender categories.