John Nemecek, 55, who goes by Julie Marie Nemecek and often wears a wig and dress, is fighting the dismissal by Spring Arbor University, which takes effect June 1.
The ordained Baptist minister has filed a discrimination claim with the U.S. Equal Employment Opportunity Commission.
"I have worked hard for this university, have been praised for my performance, and I have done nothing immoral or sinful," Nemecek told the Jackson Citizen Patriot for a Sunday story.
Officials at Spring Arbor, which is affiliated with the Free Methodist Church, declined to comment to the newspaper. They said in a statement released by a public relations firm: "We expect our faculty to model Christian character as an example for our students."
Faculty who "persist with activities that are inconsistent with the Christian faith" may be fired, the statement said. In their response to Nemecek's EEOC complaint, college officials said the Christian mandate is critical to Spring Arbor and is protected by civil rights laws.
Nemecek, who has worked for the university for 16 years, was told in December that he had violated an updated contract that included a ban on his appearing as a woman on campus or in the town of Spring Arbor, a city of 2,200 located 95 miles west of Detroit.
Nemecek began his transformation in 2005 with estrogen therapy. Soon after, the college prevented him from teaching in classrooms, interviewing prospective employees or attending graduation ceremonies.
Nemecek has worked out of his home for more than a year, directing online classes.