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Objectives: To review evidence from prospective cohort studies of the relationship between hormone therapy and changes in psychological functioning and quality of life in transgender individuals accessing hormone therapy over time. Data Sources MEDLINE, PsycINFO, and PubMed were searched for relevant studies from inception to November 2014. Reference lists of included studies were hand searched. Results: Three uncontrolled prospective cohort studies, enrolling 247 transgender adults (180 male-to-female [MTF], 67 female-to-male [FTM]) initiating hormone therapy for the treatment of gender identity disorder (prior diagnostic term for gender dysphoria), were identified. The studies measured exposure to hormone therapy and subsequent changes in mental health (e.g., depression, anxiety) and quality of life outcomes at follow-up. Two studies showed a significant improvement in psychological functioning at 3–6 months and 12 months compared with baseline after initiating hormone therapy. The third study showed improvements in quality of life outcomes 12 months after initiating hormone therapy for FTM and MTF participants; however, only MTF participants showed a statistically significant increase in general quality of life after initiating hormone therapy. Conclusions: Hormone therapy interventions to improve the mental health and quality of life in transgender people with gender dysphoria have not been evaluated in controlled trials. Low quality evidence suggests that hormone therapy may lead to improvements in psychological functioning. Prospective controlled trials are needed to investigate the effects of hormone therapy on the mental health of transgender people.