The prisoner, in her 20s and serving a life sentence for manslaughter and attempted rape, is legally female and her birth certificate has been amended accordingly, the court heard.
Born male, she has had hair on her face and legs permanently removed by laser and has developed breasts after hormone treatment.
Describing her as 'a woman trapped inside a man's body', barrister Phillipa Kaufman said the prisoner was desperate for gender reassignment surgery but medics have refused unless she has lived as a woman for an extended period - only possible if she is moved to a female jail.
She is forbidden from wearing skirts or blouses, or more than 'subtle' make up, at the men's prison.
The prisoner, who cannot be identified, is arguing that the refusal to move her to a women's prison amounts to a violation of her human right to respect for her private life, enshrined in the European Convention on Human Rights.
The transsexual has served her minimum jail term but has been told by the Parole Board that she remains an unacceptable risk to the public, Miss Kaufman told Judge David Elvin QC.
The barrister said the prisoner's past offences - she strangled her boyfriend and tried to rape a shop assistant - were 'intimately bound up' with her gender problems.
The prisoner, dressed in a dark blue blouse and striped jacket and wearing gold earrings, listened by video link as Miss Kaufman told the judge: 'There is absolutely no security reason why she should be kept where she is. If she remains in the male estate, she is looking at the bleakest future in terms of what matters to her.
'What she would have in the female estate is hope; hope that she will be able to live in role and persuade her doctors that she should have gender reassignment surgery'.
Oliver Sanders, for the Justice Department and the Prison Service, argues that in a female prison the transsexual would be unlikely to be accepted by inmates and would have to spend long periods in segregation, at an extra cost of £80,000 per year, Daily Mail reported.
The hearing continues.