The new documents let travellers choose from male, female or 'x', so that people who identify as neither male or female can be represented.
The decision is part of Canada's move towards inclusivity.
Hon. Ahmed Hussen, Minister of Immigration, said: "We are taking an important step towards advancing equality for all Canadians regardless of gender identity of expression."
In 2016 the government appointed a special advisor for LGBT+ issues and earlier this year they also passed special protections against LGBT+ discrimination.
Canada isn't the only country with a third gender category on their passports, at least eight other nations five people the option - including Germany, India and Pakistan.
A discrimination suit was filed against the US State Department demanding a gender neutral option on passports.
Meanwhile certain US states are standing up for progress - Washington DC and Oregon have introduced gender neutral identifiers on driver's licenses.