Teachers will be required to disclose the information even when pupils object, The Sun reported.
At the moment, many schools are making their own decisions – such as whether to introduce gender-neutral toilets or changing rooms.
Labour has criticised ministers for delaying issuing the guidance, insisting schools, parents and pupils are “sick and tired” of reading conflicting rumours about it in the newspapers.
Education minister Nick Gibb promised earlier this month it was being drafted and would be published soon.
A government source told The Sun: “Parents have got to be kept in the know about their child while they are at school and be consulted when sensitive matters arise.
“If their child expresses a desire to transition, for example, it’s vitally important that parents are made aware and have a say.
“It is in everyone’s best interest to ensure this happens, so that the child is looked after, teachers are clear in how they must handle the situation and parents know so that they can handle it appropriately and sensitively.
“The guidance will be crystal clear on all fronts.”
The move will likely draw criticism from some opposition MPs and LGBT campaigners.
Labour former minister Ben Bradshaw has said instructing schools to “out pupils to their families would be totally outrageous”.
Mr Bradshaw told the Commons earlier in June: “Given that one-third of LGBT young people would not feel confident to come out to their parents … a quarter of homeless young people are LGBT young people who have been chucked out of their homes by their families, and given the NSPCC (National Society for the Prevention of Cruelty to Children) says you should never ever disclose someone’s gender identity or sexuality against their will except in exceptional circumstances around safeguarding, does he agree with me that to instruct schools to out pupils to their families would be totally outrageous?”
Mr Gibb stressed “parental involvement is paramount in decisions about their children”.
He said: “It is crucial that schools work to ensure that parents are involved in decisions about their children and we will be publishing the draft guidance shortly and there will be a full public consultation on our proposed approach.”