A growing body of empirical research has documented the mental health experiences of Australian transgender people. This research indicates three key factors that appear to play a role in determining outcomes for adult transgender Australians: (a) discrimination, (b) access to hormones and/or surgery, (c) community connectedness. Two theoretical frameworks clarify why these factors exist and how they can lead to either negative or positive mental health outcomes. The first is cisgenderism, which describes the ideology that delegitimises people's own understanding of their genders and bodies. Although anyone can experience cisgenderism, it is a particularly common experience for transgender people. The second is decompensation, which describes the processes through which the cumulative effects of stressors may lead to poor mental health. Drawing on both previous empirical findings and these two theoretical frameworks, this article proposes, and provides initial testing of, a model for understanding the mental health of transgender adults in Australia. The article concludes by suggesting the need for changes regarding how decisions are made about mental health service provision for transgender people, how mental health professionals understand the lives of transgender people, and how legislation can better ensure the full inclusion of transgender people in Australia.