Transsexuals who have yet to have a sex-change operation will be entitled to two ID cards, Home Office Minister Lady Scotland of Asthal has said.
Peers defeated the government twice on Monday
One would be in their gender at birth and the other in their legally-acquired "gender of designation".
Lady Scotland spoke out as the controversial ID Cards Bill cleared its latest hurdle despite suffering two defeats in the House of Lords.
The bill's report stage was completed. A third reading is set for 6 February.
Disclosure of information
On Monday peers voted 155 to 138, - a majority of 17 - against the government to ensure the scheme's proposed watchdog - the National Identity Scheme Commissioner - is appointed by the Crown, rather than the home secretary.
Then peers voted by 145 to 139 - a majority of six - for the watchdog to report to Parliament rather than by the home secretary.
The government avoided another defeat when peers voted 155 to 155 on a Tory move to clarify the home secretary's role in authorising the disclosure of ID information.
Amendments by Tory Lord Crickhowell, the former Welsh Secretary Nicholas Edwards, would allow the watchdog to consult the home secretary on whether parts of his report should be left out on national security grounds or for the prevention or detection of crime.
Lady Scotland said the reports should be treated in the same way as those of the Intelligence Services Commissioner, the Surveillance Commissioner and the police inspectorate.
They were not in the same category as those of the Information Commissioner or the Immigration Services Commissioner, which are laid before Parliament, she said.
It should be the home secretary, not the commissioner, to decide what should be omitted because he or she had a "thorough overview" of issues affecting crime and national security.
She argued that the edited version of the report would be published by the home secretary, adding that security briefings would "significantly change" the nature of the commissioner's role.
Peers have already amended the bill to delay its implementation for a full cost-benefit analysis.
They have also called for a separate act of parliament before the voluntary ID scheme can be made compulsory.
After the bill's third reading in the Lords, it will return to the Commons where ministers are expected to ask MPs to overturn the Lords defeats.