"The definition of hate crime must immediately be broadened. The government has to guarantee our right to live," Ebru Kiranci, an official from Istanbul's Lesbian, Gay, Bisexual and Transgender (LGBT) association, told AFP.
Reforms contained in a so-called "democratisation package" call for jail terms of between one and three years for crimes based on race, nationality, skin colour, gender, disability, political views, beliefs or religion.
But the legislation submitted to parliament on Thursday notably excludes crimes based on ethnicity and sexual orientation.
Gay rights groups want changes in the criminal code to designate hate and prejudice as an aggravation cause for crimes related to sexual oriantation.
Unlike other Muslim countries, same-sex relationships have never been criminalised in Turkey, where prostitution and sex change operations are legal.
But traditional Islamic values hold sway over large sections of society in Turkey, a predominantly Muslim though secular country.
Kiranci said 36 transgender people, including six sex workers, were killed in Turkey between 2008 and 2012.
"They (the government) turn a blind eye to murders to shore up support from their base. But we are also their support base," Kiranci said.
Turkey goes to the polls next year in local and presidential elections, followed by a legislative election in 2015.
Although the Islamist-rooted Justice and Development Party (AKP) has enacted a series of human rights reforms to boost its efforts to join the EU, it has failed to recognise homosexual rights.
Gay groups were among those who joined the nationwide demonstrations in June against Prime Minister Recep Tayyip Erdogan's government to highlight their cause.
"There are people in Turkey who kill their children just because they are homosexual. This has to stop," said Murat Koylu, foreign affairs coordinator of Ankara-based gay rights group Kaos GL.
"We are really disappointed," he told AFP, citing the cases of dozens of people who lost their jobs due to their sexual orientation.
A man is currently on trial in the southeastern province of Diyarbakir for killing his 17-year-old son in May, allegedly for being gay, and dumping his body outside a hospital.