Transgender individuals are misunderstood and inadequately treated in many conventional substance abuse treatment programs. This article reviews current concepts regarding the definition and diversity of transgenderism and summarizes the existing literature on the prevalence and correlates of substance use in transgendered populations. Examples of culturally competent and gender-sensitive treatment in specialized settings are cited, with a call to extend these initiatives throughout the gamut of service venues that engage transgender individuals. Cultural competence combined with gender sensitivity should improve the effectiveness of substance abuse treatment for transgender individuals and will contribute to the goal of providing effective services in an increasingly diverse society.