Until 2011, the agency required only a doctor's affidavit.
The agency began demanding a surgeon's note that April after state licensing officials at the time decided applicants were providing insufficient information about their gender transformation and more details were needed.
Interviewed Tuesday, Division of Motor Vehicles administrator Alan Frew said his agency now agrees with the ACLU — that it went too far.
"We want to be out of the business of determining gender at our DMVs," Frew said. "We felt this policy was much more fair and far less invasive."
The ACLU said many people who change their gender designation undergo only hormone treatments, not surgery, which is expensive and often unnecessary to allow for a person to live within their identity.
Consequently, ITD's 2011 policy was not only a privacy invasion but also an inappropriate medical standard, said Idaho ACLU Executive Director Monica Hopkins.
"These are medical decisions that are made between a patient and physician or medical care giver," Hopkins said.
While states generally don't demand surgical documentation, this issue has emerged elsewhere.
A lawsuit brought by the ACLU prompted Alaska to change its licensing rules in 2012.
And Idaho's neighbor to the east, Wyoming, still requires those seeking such a change provide proof of surgery.
Wyoming ACLU's executive director, Linda Burt, said her organization received one complaint in recent years.
It was resolved, she said, resulting in the individual receiving a license with the appropriate gender designation.
"We're always open to receiving those kinds of complaints," Burt said. "But as far as ... any legislative changes, we haven't done that."
A Wyoming Department of Transportation spokesman, Dave Kingham, said there are no pending complaints.