A male science teacher at an Exeter secondary school is currently undergoing treatment after being diagnosed with gender identity disorder and will return to lessons as a woman.
St Peter's status as a Church of England school made the case more sensitive, but the school has won wide praise for its careful planning.
European law protects employees against discrimination on grounds of gender or changed gender. However, the best was made of a difficult situation and only one dissenting voice was heard; that of Dr Adrian Rogers, who is a Tory prospective parliamentary candidate.
As the story broke, the civil servant responsible for misconduct issues at the Department for Education and Employment spoke to Gill Sage, lawyer for the Association of Teachers and Lecturers, about whether it was possible to issue guidance to schools. It was decided to take cases on their merits.
According to Ms Sage, a European court ruling last year against Cornwall county council protects employees from being dismissed by reason of gender or changed gender. Only a few jobs - called genuine occupation qualifications - are exceptions to this rule, although it is possible that it might apply to PE staff or those working in boarding schools.
It is unlikely that transsexuals could lose their jobs if it was subsequently discovered that they had been born a different gender.
The St Peter's Church of England High School story broke last week after a letter was sent to parents of the 1,000 pupils, although headteacher Mark Perry said many staff and students had been aware of the situation for some time.
Tony Bradley, 37, who has taught at the school since September 1993, is currently on sick leave and undergoing lengthy treatment.
Mr Perry said: "There will come a stage soon when he will become known as Ms Bradley and will be, to all intents and purposes, a female teacher on the staff, dressing and behaving as such.
"There is no reason to suppose that the transition, of itself, will affect the high quality of teaching and learning we have come to expect in Mr Bradley's classes."
He was heartened but unsurprised by the support already expressed for the teacher.
He added: "There is no question of this being a disciplinary issue. Although we recognise that attention will be focused on St Peter's it is my firm belief and intention that life within the school will continue as normal."
Simon Jenkin, Devon's chief education officer, said: " I am satisfied that this is not a disciplinary matter - it is a medical and legal issue. Parents will have understandable concerns, but I am satisfied that the school is dealing with it in a thoroughly responsible way."
The Rev Christopher Davidson, the Exeter Diocesan Director of Education, said: "St Peter's strengths include the pastoral support it provides to students and staff alike, and the good relationship with parents.
"In dealing sensitively with this matter and also supporting the teacher concerned, this tradition has stood the school in good stead."
Heather Morgan, the school's chair of governors, said: "Our decisions have been made with the best interests of all students in mind. We have also considered our pastoral duty to all our staff, the concerns of parents, the Christian foundation of the school, the legal position and good management practice."