The U.S. Justice Department has sued North Carolina over its law restricting the use of public restrooms by transgender people, which U.S. Attorney General Loretta Lynch says amounts to "state-sponsored discrimination."

The lawsuit says the law has caused transgender people to suffer "emotional harm, mental anguish, distress, humiliation, and indignity." It seeks an order that would prevent the law's enforcement.

Lynch spoke directly to residents of her native state, saying they have been falsely told by North Carolina proponents that the law protects vulnerable people from harm in bathrooms.

"Instead, what this law does is inflict further indignity on a population that has already suffered far more than its fair share," she said. "This law provides no benefit to society, and all it does it is harm innocent Americans."

The Justice Department's lawsuit was filed just hours after North Carolina Gov. Pat McCrory filed his own lawsuit over the law. McCrory wants the sweeping law, which limits protections for gay, lesbian, transgender and bisexual people, kept in place.

McCrory says his lawsuit asks a federal court to clarify what the law actually says with billions in federal aid at stake.

McCrory, a Republican, and the state's secretary of public safety accused the agency of "baseless and blatant overreach."

U.S. Justice Dept. sues N.C. over bathroom law1:35

In March, North Carolina became the first state in the country to require transgender people to use restrooms in public buildings and schools that match the sex on their birth certificate instead of one that matches their gender identity.
 
The Justice Department's top civil rights lawyer, Vanita Gupta, sent letters to North Carolina officials last week, saying the law was a civil rights violation and the state could face a federal lawsuit if it did not stop enforcing it by Monday.
 
The North Carolina officials are now suing Gupta as well as Lynch for their "radical reinterpretation" of federal civil rights law in federal district court in North Carolina.

"We're taking the Obama admin to court. They're bypassing Congress, attempting to rewrite law & policies for the whole country, not just NC," McCrory wrote on Twitter.

The White House restated President Barack Obama's opposition to the law on Monday, calling the law "mean-spirited" and "inconsistent with the values of fairness and equality and justice."

White House spokesman Josh Earnest says the Justice Department's action was taken "independent of any sort of political interference or direction from the White House."

He said the administration continued to conduct a separate review of whether agencies might cut funding to the state in response to the law.

LGBT Rights North Carolina

Pat McCrory, governor of North Carolina, accused the Obama administration of overreaching on the states' law on public restroom access. (Gerry Broome/Associated Press)

Americans divided

The so-called bathroom law has thrust North Carolina into the centre of a national debate over equality, privacy and religious freedom in the wake of a U.S. Supreme Court ruling last year that legalized same-sex marriage.
 
Prominent entertainers cancelled performances in the state in protest of the law, associations relocated conventions and companies halted projects that would create jobs in the state.

Texas Senator Ted Cruz, who recently suspended his bid for the Republican presidential nomination, is hoping to push for so-called bathroom laws at the Republican national convention, according an email to convention delegates by his adviser Ken Cuccinelli.

"Boys should only be allowed to go in the boys' bathroom, and girls should only be allowed to go in the girls' bathroom," wrote Cuccinelli.

Americans are divided over how public restrooms should be used by transgender people, according to a Reuters/Ipsos poll, with 44 per cent saying people should use them according to biological sex and 39 per cent saying they should be used according to the gender with which they identify.

North Carolina stands to lose $4.8 billion in funds, mainly educational grants, if it does not back down, according to an analysis by lawyers at the University of California, Los Angeles Law School.
 
McCrory said in a statement that he had filed the suit to ensure that North Carolina continues to receive federal funding
until a court resolves the dispute.

LGBT Rights North Carolina

North Carolina officials are suing the U.S. Justice Department's top civil rights lawyer Vanita Gupta, left, and Lynch for their 'radical reinterpretation' of federal civil rights law. (Evan Vucci/Associated Press)

He noted his office had sought additional time to respond to the Justice Department letters but said the request was refused "unless the state agreed to unrealistic terms."

Officials at the University of North Carolina system, who also received a civil rights violation notification letter from
the Justice Department last week, did not join the suit that McCrory filed on Monday. The university could not immediately be reached for comment.
 
The letters were "a statement that they clearly are ready to litigate" on behalf of transgender people in North Carolina,
said Chai Feldblum, a commissioner at the U.S. Equal Employment Opportunity Commission.
 
The commission works with the Justice Department to investigate discrimination charges by public employees.

With files from Reuters