This study aimed to assess participation rates of transgender and gender diverse (trans) people in sport/fitness activities, compare mental health outcomes for trans people participating in sport/fitness with those who do not and explore internal/external barriers and bullying experiences faced by trans people in sport/fitness contexts. A cross-sectional online survey open to trans people aged ≥16 years living in Australia was conducted between February and April 2023 and it assessed rates of sport/fitness participation, barriers to participation and bullying experiences through multiple-choice questions. Mental health measures comprised the Kessler Psychological Distress Scale (K10) and self-reported history of self-harm and suicidality. Covariate-adjusted binary logistic regression models tested associations between interpersonal factors, sport/fitness variables and mental health outcomes. Of 664 respondents (median age 32 years), around one-third (32.8%) regularly participated in sport/fitness. Common internal barriers to participation included anxiety about others' reactions (63.9%), body dissatisfaction/dysphoria (56.5%) and fears about feeling accepted/affirmed by others (54.7%). Respondents commonly reported experiencing inadequate bathroom/changing facilities (44.4%), exclusionary rules and regulations surrounding gender (36.7%), and invasive or uncomfortable policies or procedures (23.3%). Over one-third (34.4%) of trans people had experienced gender-based bullying or exclusion. Regular sport/fitness participation was associated with significantly lower K10 scores (mean difference=-4.4, 95% CI-5.8, -2.9, p<0.001) and a 40% reduction in odds of recent thoughts of self-harm and suicide (aOR 0.6, 95% CI 0.5, 0.9, p=0.01; aOR 0.6, 95%CI 0.4, 0.9, p=0.02). Trans people face significant barriers to sport/fitness despite experiencing significant mental health and personal benefits from participation. Affirming and including trans people in sport and fitness should be a key priority for sport and fitness federations, organisations and policy-makers.