Education is widely recognized as a powerful tool for social transformation and empowerment in addressing contemporary challenges. However, despite expanded access to education for much of society, transgender students continue to struggle for equitable and inclusive educational opportunities. They face enduring obstacles that restrict their academic engagement and well-being.  This systematic review specifically aims to identify and synthesize the major social, academic, institutional, and psychological challenges affecting the inclusion of transgender and gender-diverse students in higher education and to examine institutional practices and recommendations that may contribute to more inclusive educational environments. The Semantic Scholar, Google Scholar, Web of Science, and Scopus databases were utilized to conduct a thorough literature search for research published between January 2010 and May 2025. PRISMA principles were adhered to in the review. Relevant data were extracted and analyzed thematically after studies were screened according to predetermined inclusion criteria. Out of the 850 screened records, 27 studies met the requirements for inclusion. The results showed that multi-level dynamics shape inclusion. Transgender and gender-diverse students face prejudice, stigma, exclusion, harassment, and structural barriers at interpersonal and institutional levels, while institutions often demonstrate inadequate policy implementation, insufficient awareness, and weak enforcement of protective measures. The review further identified that effective inclusion requires gender-neutral facilities, inclusive curricula, staff training, comprehensive non-discrimination and housing policies, anti-bullying mechanisms, mentorship programs, support groups, and active institutional feedback systems. The findings indicate that inclusive institutional approaches significantly improve the academic and social experiences of transgender students. Achieving meaningful gender inclusion in higher education, therefore, requires sustained institutional commitment and a whole-institution approach.