Approximately 1 per 2000 children born in the United States are described as having ambiguous genitalia.
Currently, when a child is born and the sex is in question, a team of specialists are gathered to examine the child and determine the management. This team includes geneticists, endocrinologists, urologists, and others. There is pressure to establish a sex as quickly as possible and begin treatment in order to prevent any ambiguity  . Management includes surgery on any anatomy that is abnormal, hormonal monitoring and replacement if needed, and follow up of the psychosocial adjustment of the child. Further surgeries may also be necessary later in life . Recently, considerable controversy has arisen in the management of intersexed infants  .
The management of intersexed individuals has often been paternalistic. Until recently, it was encouraged to tell the patient and/or parents as little as possible about the diagnosis. Sex assignment and medical intervention were believed to be in the best interest of the child . The medical team usually decided which sex was most appropriate for the child without much consultation with the parents and they were often pressured into consenting to surgeries . Further, secrecy about the issue was encouraged so that patients would have no reason to question their sex assignment and would therefore be less likely to develop gender dysphoria.
Increasingly, intersexed patients have spoken out against the way their cases were managed by health care professionals. The Intersex Society of North America is an organization that was founded and is run by people who consider themselves to be intersexed. The organization speaks out against secrecy and recommends that surgery on intersexed infants be delayed until the patient is able to consent to it  .
Others still argue that early sex assignment is important to prevent psychological and social problems for the child . These people believe that parents should be told that their child is either male or female (not ambiguous) to prevent any confusion that could be later transferred to the child. The problem can then be explained as an anatomical abnormality that can be corrected with surgery and/or hormones. This approach is thought to ensure proper bonding between the parents and child. Some researchers agree that the sex assignment should be made early but that the parents should be the ones who make the decision  .
There is no evidence however, that infants are born gender-neutral and that they can successfully be raised as either sex without any feelings of confusion when they are older. Transsexuality itself seems to show that genital morphology and upbringing do not necessarily relate to gender-identity. There is evidence though, that people born with genitalia that are outside of "normal" can lead satisfying psychosexual lives .
One of the problems with early sex assignment is that parents may not have enough information to make informed decisions. Health care professionals have, in the past, often misrepresented the efficacy of surgical procedures to the parents. The long-term outcomes of these surgeries are unknown and should be explained along with the known risks such as scarring, decrease in sensation, and the high probability of requiring further procedures in the future  . The approach to an intersexed patient should be individualized. A sense of urgency is usually conferred to the parents which pressures them into a decision. There are few life-threatening effects of ambiguous sex. For this reason, those that argue against immediate surgical correction of intersexed infants believe that parents should be allowed to make the decisions in their own time. Some also encourage parents and clinicians to be flexible if the child decides to have her/his sex reassigned in the future. 
A number of authors suggest that surgery prevents a child from making her/his own decisions about sex assignment in the future and that certain surgeries can be postponed until the child can be involved in the consent   . The purpose of genital surgery has also been questioned. Should surgery on genitals be performed for the purpose of conforming to cultural expectations of what a normal boy or girl look like? Further debate surrounds the issue of whether intersexed children should be assigned a female or male sex at birth which can be changed later, or be raised as intersexed individuals.
Sex assignment has often depended on the functionality of the penis or female reproductive capacity  . Genetic males born with phalluses that were too small were often surgically transformed into females  . Genetic females were surgically assigned the female sex regardless of how masculine their genitalia may have been in the hopes of preserving reproductive potential. Phalluses that were less than 2-2.5 cm long were considered too small to be functional penises and a clitoris was considered too big if it exceeded one centimeter in length  . Surgical corrections as described above have been considered to be heterosexist. For example, females have had vaginas constructed with the assumption that they will desire to have penile penetration in the future.
There are some situations that are less debated. For example, patients with congenital adrenal hyperplasia have a metabolic disorder that is life-threatening and is associated with genital virilization. Most agree that it is important to diagnose this condition quickly and treat it accordingly  . Studies have also shown that undescended testicles have an increased risk of becoming cancerous but, even here, there is debate between early removal watchful waiting.
The American Academy of Pediatrics describes, in their policy statement from 2000, that "the birth of a child with ambiguous genitalia constitutes a social emergency". The Academy states that infants with ambiguous genitalia that are to be raised as girls "will usually require clitoral reduction which, with current techniques, will result not only in a normal-looking vulva but preservation of a functional clitoris." However, there is no reference cited to support this statement. Many researchers claim that, in fact, there are few studies that show that surgeries have acceptable long-term outcomes or that there is any physical or psychological benefit to genital surgery for intersexed patients   . Such studies that do exist are also unable to define what makes an outcome successful. Specifically, a successful esthetic outcome may not lead to a successful functional outcome. What is known however, is that few patients require only one surgery  .
Nelson’s Textbook of Pediatrics acknowledges that there is controversy in the field of intersex management. The textbook recommends determining the cause quickly but is hesitant about recommending surgical procedures that adjust phallus size stating: "a poorly functioning female external genital system may be no better then a poorly functioning male phallus. In addition, sexual functioning is to a large extent more dependent on other neurohormonal and behavioral factors then the physical appearance and functional ability of the genitals." The authors further state that "whenever possible without endangering the physical or psychological health of the child, an expert multidisciplinary team should consider deferring elective surgical repairs and gonadectomies until the child can participate in the informed consent for the procedure."
2. Beh HG, Diamond M. An emerging ethical and medical dilemma: Should physicians perform sex asignment surgery on infants with ambiguous genitalia? Michigan Journal of Gender and Law. 2000;7(1): 1-63.