The deputy Labour leader criticised those opposing trans rights and insisted the cause was no threat to women.
Her comments referenced the section 28 clause introduced under Margaret Thatcher’s Conservative government, which prohibited the “promotion of homosexuality” by local authorities. The legislation was repealed in Scotland in 2000.
Speaking at a Labour LGBT+ event at her party conference on Tuesday, Ms Rayner warned failing to do so would make a “mental health crisis” even worse.
She said: “Hate crimes have been soaring, bullying, discrimination, anti-LGBT hate.
“There is a mental health crisis that is hitting our LGBT communities especially hard.
“And I have to say that there is a campaign of hate coming out of this government.
“Ministers are looking at vulnerable people, they're looking at our trans community, they are looking at people's identities and they see it as an opportunity to divide people.
“That is disgusting. That is disgraceful.”
Ms Rayner also condemned the reporting on trans issues, labelling it “terrible”.
She said: “I’m afraid afraid to say that there is what appears to be a campaign in some parts of the media too.
“I have never seen so much inaccurate reporting.
“I've heard and seen so many panel discussions where trans people are being talked about and accusations are being made, but there isn't anyone representing trans.
“I stand with Stonewall and what you said about the treatment of these issues in the media.
“All of us in politics, in public life and the media have an absolute duty of care to how we talk about these issues.
“We are the party that is committed to achieving a world free of all forms of bigotry and discrimination.
“So we will update the Gender Recognition Act to create a process of self ID.
“We are the party that abolished section 28 and we will fight this section 28 moment again.”
Her comments were echoed by Dame Angela Eagle, who claimed the anti-trans sentiment was reminiscent of the homophobia she witnessed in the 1980s.
Dame Angela said: “What happened then has got its echoes in what happens now.
"Then they called it political correctness gone mad, now they call it the war on woke.”