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Businesses and musicians have boycotted the state over the
highly controversial law
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North Carolina is suing the US Department of Justice over its attempts to bar the state from upholding its anti-LGBT "bathroom bill".
The justice department had given the state a Monday deadline to respond to a letter demanding it abandon the controversial law.
The law violates federal civil rights protections, the department has said.
North Carolina could lose funding for state universities if it upholds the legislation.
The law invalidated several local anti-discrimination measures that protected gay and transgender people.
It also requires people to use public toilets that correspond to the sex listed on their birth certificates.
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Governor Pat McCrory called the Justice Department letter an
overreach
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The lawsuit seeks to keep the law upheld, calling the law a "common sense privacy policy" and accuses the federal government of "baseless and blatant overreach".
"This is an attempt to unilaterally rewrite long-established federal civil rights laws in a manner that is wholly inconsistent with the intent of Congress and disregards decades of statutory interpretation by the courts,'' the lawsuit said.
Supporters of the law say policies that allow transgender people to use toilets according to their gender identity increases the threat of sexual assault.
What groups are boycotting the law?
- Major businesses such as PayPal, Bank of America, Deutsche Bank and Apple
- Musicians such as Demi Lovato, Bruce Springsteen, Pearl Jam, Cirque de Soleil, Ringo Starr and Boston have cancelled shows in the state
- Other artists such as Beyonce made statements calling for equality at their shows in the state
- American sport leagues like the NCAA and NBA have threatened to cancel events in the state if the law is not repealed
"The Obama administration is bypassing Congress by attempting to rewrite the law and set restroom policies for public and private employers across the country, not just North Carolina," said Governor Pat McCrory.
"They are now telling every government agency and every company that employs more than 15 people that men should be allowed to use a women's locker room, restroom or shower facility."
Gay rights advocates have said the law places a stigma on the transgender community and spreads dubious claims about increased risk of sexual assault. The law will deny the LGBT community basic protections, the groups said.
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