Characterizing a transsexual person as heterosexual or homosexual is problematic. Historically, clinicians labeled transsexual people as heterosexual or homosexual relative to their birth sex, but most transsexual people find this offensive and define their sexual orientation relative to self-defined gender identity. For example, a transwoman attracted to other women would self-identify as a lesbian, not as a heterosexual. To avoid confusion and offense, the terms gynephilia (attraction to women) and androphilia (attraction to men) have been proposed.
Richard Green notes that though cross-gender identity has existed throughout history, "the term 'transsexual,' being of comparatively recent origin, cannot be found in historical sources." 
Transsexual people exhibit the full range of possible sexual orientations and interests,  including a lack of interest in sex.  Some maintain a consistent orientation throughout their lives,  in some cases even remaining with the same partner through transition.  In other cases, their choices in sexual partners may change after transition. 
Taxonomies based on sexuality
Sexologist Magnus Hirschfeld first suggested a distinction based on sexual orientation.  A number of two-type taxonomies based on transsexual sexuality have subsequently been proposed by clinicians, though some clinicians believe that other factors are more clinically useful categories, or that two types are insufficient. 
Endocrinologist Harry Benjamin was a pioneer in medical services for transsexual people. He proposed the Benjamin Scale in 1966 as an early attempt to categorize transsexuals based on his observations. The scale was based on the Kinsey scale created by sexologist Alfred Kinsey. Where Kinsey's scale is a continuum between exclusively heterosexual and exclusively homosexual, Benjamin's scale is a continuum between transvestism and transsexualism. This system has six grades of transsexual from "Pseudo-transvestite" at level 1, to a "True Transsexual (High Intensity)" at level 6. 
Following Benjamin, Buhrich and McConaghy proposed three clinically discrete categories of fetishistic transvestism: "nuclear" transvestites who were satisfied with cross-dressing, "marginal" transvestites who also desired feminization by hormones or surgical intervention, and "fetishistic transsexuals," who had shown fetishistic arousal but who identified as transsexuals and sought sex reassignment surgery. 
Person and Ovesey proposed the terms primary versus secondary transsexualism. They defined primary transsexuals as asexual persons with little or no interest in partnered sexual activity and with no history of sexual arousal to cross-dressing or cross-gender fantasy.  They defined both homosexual and transvestic transsexuals to be secondary transsexuals.  Later uses of this terminology often defined primary transsexualism as attracted to males, and secondary transsexualism as attracted to females.
McConahay and McConahay reported that transsexual people have more heterosexual than homosexual experiences.  According to two published reports, about half of male-to-female transsexuals had sexual intercourse with females.  Bentler found an almost equal distribution of 42 male-to-female studied transsexuals between three distinct categories: homosexual, asexual, and heterosexual.  Leavitt and Berger claim "By far, the majority of males seeking reassignment are attracted to males."  In the same study, Leavitt and Berger found that "those patients who derived erotic pleasure from their penis were more likely to be emotionally unstable, and less likely to have switched to full-time living as women, suggesting that clinicians may be dealing with different disorders that require separate explanations." Hoenig and Kenna reported that most transsexuals masturbate.  In a study with 44 subjects, Langevin reported 88% allowed a male partner to touch their penis, 29% received fellatio, and 2% performed anal sex.  Stoller claimed that erotic pleasure in the penis does not exist in the true transsexual. 
Diagnostic and Statistical Manual of Mental Disorders
In the United States, the Diagnostic and Statistical Manual of Mental Disorders is the primary reference in psychology. The DSM has employed several diagnostic categories since its inception. After the DSM removed homosexuality as a mental illness in 1973, several other diagnoses were used, including ego-dystonic homosexuality.
In DSM-IIIR "Transsexualism" was a disorder classified under "Disorders usually first evident in infancy, childhood, and adolescence." DSM-IIIR also listed "Gender identity disorder, adolescence or adulthood, non-transsexual type" (GIDAANT). 
A taxonomy created by Ray Blanchard in 1989 proposes two categories for male-to-female transsexual people: homosexual and nonhomosexual. Blanchard's theories were popularized by sexologists J. Michael Bailey and Anne Lawrence. The taxonomy claims that "homosexual transsexuals" are an extreme type of gay man, where "nonhomosexual transsexuals" are driven to transition by "autogynephilia," a paraphilia Blanchard coined which means arousal at "the thought or image of oneself as a woman." This theory is generally very controversial among transsexual people and clinicians, who take issue with the terminology and its biological reductionism.
Cultural differences in transsexual sexuality
Sexual behavior and gender roles vary by culture, which has an effect on the place of gender variant people in that culture. In most cultures, transsexual people are stigmatized, and sexual activity involving transsexuals is considered shameful, especially in cultures with rigid sex roles or strictures against non-heterosexual sex. In many cultures, transsexual people (especially transwomen) are frequently relegated to sex work.
In the United States, African American transsexuality and Hispanic Transsexuality occur in a cultures with significant levels of machismo and homophobia. Spanish language further adds to the stigmatization of gender variant people through the use of grammatical gender. In these cultures, a distinction is sometimes made between active and passive sexual activity, where the passive or receiving partner is not considered masculing or straight, but the active partner is.  Some observers question the racist assumptions behind clinical literature on transsexual sexuality in various ethnic groups.