Currently, the United States only allows Americans to select male or female on their passports, passport cards and consular reports of birth abroad.
But 15 states -- plus Washington, D.C. -- already allow non-binary ID options, as the number of Americans identifying as neither male or female grows.
According to the National Center for Transgender Equality (NCTE), non-binary individuals are identified as those who "don't neatly fit into the categories of 'man' or 'woman,' or 'male' or "female.'"
The NCTE website says: "Some have a gender that blends elements of being both a man and a woman, or a gender that is different than either male or female," which can include those who identify as transgender.
On the other hand, being intersex means having anatomy or genes that don’t fit typical definitions of male and female.
NCTE supported Khanna's bill, with its executive director Mara Keisling telling ABC News that members of the transgender and intersex community can only receive passports now by "lying" about who they are.
"If the government is going to be in the business of declaring and labeling our gender, it should at least reflect today’s science and allow everyone to answer truthfully," she said in a statement.
The bill was drafted over the course of the last year in consultation with numerous outside organizations and activists from across the country, according to Khanna.
"To be frank, it’s amazing to me that this bill hadn’t already been introduced," Khanna told ABC News. "The idea of affording Americans the option to express their gender in whatever way they see fit should be a given in the 21st century, and I’m proud to be leading that effort in Congress."
If passed, advocates say the bill could make travel safer and easier for those who don't identify as male or female and help transportation and border authorities avoid confusion when it comes to passport holders that identify as non-binary or intersex.
"The ability to obtain accurate identity documents is imperative to the safety and wellbeing of LGBTQ people," David Stacy, government affairs director of the Human Rights Campaign, told ABC News in a statement. "Non-binary people already face disproportionately high rates of discrimination, harassment and violence."
He continued, "This risk of harm is significantly exacerbated when forced to present incongruent legal documents that do not accurately reflect who they are."
The State Department handles passports and would have to implement any changes, should the law pass and be signed by the president.
Under current federal law, U.S. passports can only list either male and female markers. While individuals are able to change their marker if they transition from one to the other, they must submit a medical certification to do so, beyond a state or local ID with their new marker, because of the strict requirements.
A State Department spokesperson declined to answer questions about the bill, saying they "do not generally comment on pending legislation."
Internationally, at least 10 countries have issued a third gender marker designation for ID documents, including Australia, Bangladesh, Canada, Germany, India and New Zealand.
In the U.S., Oregon was the first state in history to have a third gender marker on its drivers' licenses -- making it the first state to legally recognize non-binary and intersex people.
Democrats were quick to voice support for the proposed legislation. Rep. Jim McGovern, chair of the powerful House Rules Committee, was an original co-sponsor of the new bill, which Khanna said increases its chances of moving to the full floor for a vote.
Washington Rep. Pramila Jayapal, who co-sponsored the bill, tweeted Wednesday evening, "As the proud mother of a non-binary child, I have seen from a deeply personal perspective the freedom that comes from being fully and authentically yourself."
Khanna says that congressional pushback on the bill has been minimal thus far. "We’re prepared to have honest discussions with representatives across the aisle about why they, too, should support freedom of expression and equal rights for Americans of every gender," he said.
While he is confident of passage in the House, if history is an indicator; the legislation has little chance in the GOP-controlled Senate -- as Republican lawmakers have been known to vote against similar legislation.
For example, in 2017, Senate Majority Leader Mitch McConnell, R-Ky., blocked legislation that would keep President Donald Trump from banning transgender service members from the military, despite its bipartisan support.
Other bills that have been either introduced or passed by conservative lawmakers have also tried to limit transgender students' rights at school, including forcing student-athletes to play as the gender they were given at birth.
A recent bill passed by Republican lawmakers in several states has also aimed to classify sex reassignment treatment to minors as a criminal act.
ABC News' Conor Finnegan contributed to this report.