The move, which comes just days before the 34-year anniversary of the World Health Organisation's removal of homosexuality from the list of International Classification of Diseases (ICD), has prompted fury from rights groups.
Comment: It's probably incorrect to conflate the two issues.
The WHO also removed transsexuality from its disease manual in 2019 when a new version of the ICD was proposed and came into effect in 2022.
Peru's government argues the decree will make 'psychological treatment' freely available to those affected and said it 'categorically reaffirms respect for the dignity of the person and their free actions within the framework of human rights, providing health services for their benefit'.
But rights groups warned the inclusion of trans and intersex people as mentally ill could open the door to conversion therapy, which is currently banned in Peru.
Where its neighbours have grown more accepting, the South American nation has garnered a reputation for intolerance of transgenderism and LGBTQ.
In 2008, transgender woman Azul Rojas Marin was arrested, brutally raped and tortured by a trio of police officers, but her criminal complaint was ultimately closed by the authorities.
Infuriated by the Peru judiciary's refusal to act on the complaint, rights groups presented Azul's case to the Inter-American Commission of Human Rights (IACHR), which in 2018 decided that her treatment constituted torture and discriminatory violence.
When Peruvian authorities continued to ignore the findings and calls for compensation, the IACHR submitted the case to the Inter-American Court of Human Rights, which in 2020 found Peru responsible for the torture and sexual violence committed by Peruvian police officers against Azul.
Peruvian authorities did not recognise their culpability until November 2022, when the then Minister for Justice formally apologised to the victim - but the implementation of compensation still has not been decided.
Speaking on the latest decree, Percy Mayta-Tristan, a medical researcher at Lima's Scientific University of the South, said it revealed a lack of awareness of complex LGBT issues.
'You can't ignore the context that this is happening in a super-conservative society, where the LGBT community has no rights and where labelling them as mentally ill opens the door to conversion therapy,' he told Yahoo News.
Comment: Is conversion therapy more harmful than 'pro-trans' therapy which includes drugs and surgery that cause a litany of harms, including sterility and early death?
Meanwhile in Argentina, three women were killed in an arson attack last week after a man lobbed a Molotov cocktail at the home of two lesbian couples in Buenos Aires.
The May 6 attack, widely seen as a hate crime, shocked many in a nation that considers itself to be a pioneer of gay rights in Latin America.
A 62-year-old man threw a Molotov cocktail into a boarding house where the lesbian couples lived, setting it ablaze, officials said. The perpetrator was arrested.
One woman died last Tuesday and another on Wednesday, both suffering from burn injuries.
'The third victim of the attack died this Sunday at 10 in the morning,' Maria Rachid of the LGBT+ Federation said this past weekend.
The fourth woman was the only one to escape with mild injuries.
Dozens of people gathered last week in front of the boarding house, lighting candles for a vigil. On Friday, another event was held near the nation's Congress to demand justice for the attack.
Argentina has been a Latin American leader in gay marriage and identity legislation, with a 2021 law allowing nonbinary people to mark their gender with an 'X.'
However, many fear a backsliding in their freedoms under libertarian President Javier Milei.
'This hate crime is not an isolated event,' the Buenos Aires women's ministry wrote on X, saying it was a consequence of the government's 'irresponsible' discourse.
Since taking office in December, Milei has scrapped the national women's affairs ministry and the anti-discrimination agency, and banned the use of gender-inclusive language in the military.
In my view, the "trans" movement is engineered with education being used for indoctrination and play dress up as the other sex. What fun? Then followed up with puberty blockers.