Guidance issued under Obama administration said transgender students should be allowed to use washrooms that matched their gender identity.
Transgender students have lost federal protections that allowed them to use school bathrooms and locker rooms matching their gender identities, as the Trump administration rescinded rules issued during the Obama presidency.
The Associated Press reports that as a result of the new directive, it will be up to states and school districts to interpret federal anti-discrimination law and determine whether students should have access to restrooms in accordance with their expressed gender identity and not just their biological sex.
"This is an issue best solved at the state and local level," Education Secretary Betsy DeVos says. "Schools, communities and families can find — and in many cases have found — solutions that protect all students."
In a letter to the nation's schools, the Justice and Education departments say anti-bullying safeguards will not be affected by the change, according to the letter. "All schools must ensure that all students, including LGBT students, are able to learn and thrive in a safe environment," it says.
It was not clear what immediate impact the change would have on schools. A federal judge in Texas put a temporary hold on the Obama guidance last year after 13 states sued.
The guidance issued under Obama carried no force of law. But transgender rights advocates say it was useful and necessary to protect students from discrimination. Opponents argued it was federal overreach and violated the safety and privacy of other students.
The White House said "returning power to the states paves the way for an open and inclusive process to take place at the local level with input from parents, students, teachers and administrators."
The reversal is a setback for transgender rights advocates. They say lifting the Obama directive puts children in harm's way.
"Reversing this guidance tells trans kids that it's OK with the Trump administration and the Department of Education for them to be abused and harassed at school for being trans," says American Federation of Teachers President Randi Weingarten.
Conservatives hailed the change, saying the Obama directives violated the rights of fixed-gender students, especially girls who did not feel comfortable changing clothes or using restrooms next to anatomical males.
The Obama administration's guidance was based on its determination that Title IX, the federal law prohibiting sex discrimination in education, also applies to gender identity.
Legal experts said the change in position could affect pending court cases involving the federal sex discrimination law, including a case to be heard by the Supreme Court in March involving a transgender teen who was denied bathroom access in Virginia.