Jess Herbst, who became mayor of New Hope last May, made the announcement in an open letter to the town's residents.
"As your Mayor I must tell you about something that has been with me since my earliest memories. I am Transgender," she wrote.
Ms Herbst was appointed mayor following the death of her predecessor.
She had previously been elected to the Town Council as an alderman and road commissioner, according to her statement on the New Hope website.
"I know that transgender people are just coming to light in our society, and we have made great strides in the last few years," she said.
"My daughters have been adamant supporters of me and are proud to tell people their father is transgender," she added.
Ms Herbst has been documenting her experience on her blog, JessHerbst.com.
As the mayor of the small Collin County town, she is the first known openly transgender elected official in Texas history, the Texas Observer reports.
"I will continue as Mayor and hope to do the very best for the town," she said.
Transgender issues have made the headlines in Texas in recent months after Republicans unveiled the so-called "bathroom bill", a proposal that bans transgender people from using public bathrooms of their choice.
Such bills have become a flashpoint in the battle over transgender rights in the US.

In February, clubs agreed "in principle" to use the system from next season and those plans were confirmed at an EGM on 6 April.
Goalline technology has been used in the Premier League since 2013.
It has also been utilised in previous Football League play-off finals.
However, this season the technology will be available for both Championship semi-finals, as well as the final at Wembley on Monday, 29 May.
"The introduction of goalline technology is a significant step forward for Championship clubs and reflects the importance of the outcome of every single game in the division," said EFL chief executive Shaun Harvey.
"It has already proved successful elsewhere in our competitions and I'm confident it will have a similar positive impact week in, week out in the Championship, starting with this year's Championship play-off semi-finals."
The mayor of a small town in Texas has become the first transgender elected official in the state's history, local media report.
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Goalline technology will be used in this season's Championship play-offs before being introduced in all second-tier matches in 2017-18, the English Football League has said.