The case is likely to be heard in the fall with a ruling issued next year.
The U.S. Supreme Court said Monday it will take up the question of whether gay and transgender workers are protected by federal law that bars discrimination in the workplace.
The nation's highest court is considering three related cases, one involving a funeral home worker who was fired after telling her employer she was a transgender woman and would be wearing women's clothing at work.
In the other two cases, gay workers said they were fired by their employers because of their sexual orientation.
The court will decide whether Title VII of the Civil Rights Act of 1964, which bans discrimination in the workplace on the basis of race, color, religion, sex, or national origin, also applies to sexual orientation and gender identity.
In the absence of a ruling from the top U.S. court, lower courts have issued contradictory decisions.
The transgender case involves Aimee Stephens, who was fired by R.G. & G.R. Harris Funeral Homes in Michigan after working there for six years as Anthony Stephens.
Stephens sued and earned the support of the U.S. Equal Employment Opportunity Commission (EEOC) then under president Barack Obama.
The administration of Donald Trump has taken the opposite tack, however, and the president has named two conservative justices to the Supreme Court since taking office.
In the Stephens case, a lower court initially sided with the funeral home but that ruling was reversed by a federal appeals court which said her firing was a form of sex discrimination.
"What happened to me was wrong, it was hurtful and it harmed my family," Stephens said in a statement issued by the American Civil Liberties Union (ACLU), which is representing her in court. "I hope the Supreme Court will see that firing me because I'm transgender was discrimination."
James Esseks, director of the ACLU LGBT & HIV Project, said "most of America would be shocked if the Supreme Court said it was legal to fire Aimee because she's transgender.
"Such a ruling would be disastrous, relegating LGBTQ people around the country to a second-class citizen status," Esseks said. "The LGBTQ community has fought too long and too hard to go back now, and we are counting on the justices not to reverse that hard-won progress."
The two other cases are in New York and Georgia.
In the New York case, a sky-diving instructer, Donald Zarda, sued his employer claiming he was fired because he is gay. Zarda, who died in an accident in 2014, won his case, which is being pursued by his partner and his sister on behalf of his estate.
In addition to the ACLU, Zarda is also being represented by attorney Greg Antollino who said "what happened to Don Zarda was both wrong and against the law.
"All Americans should be able to work and not fear discrimination because of who they are," Antollino said. "This case matters because it is about basic human dignity, and the promise of equal treatment for all."
In the Georgia case, Gerald Lynn Bostock, a child welfare services coordinator, said he was dismissed because he is gay.
A court in Atlanta ruled against him, arguing that sexual orientation is not protected under existing civil rights law.