Target Chairman and CEO Brian Cornell said Wednesday its bathroom policy fits the retailer's long history of "embracing diversity and inclusion."
Cornell told CNBC's "Squawk Box" he wants everyone to feel welcome at his stores but stressed that safety is also very important.
Following North Carolina's law requiring people to use bathrooms matching their birth gender, Target instituted a policy to allow customers and employees to use the bathroom or fitting room that "corresponds to their gender identity."
Target has faced backlash from conservative groups such as the American Family Association, which is calling for a boycott.
In a statement on its website, the association said Target's policy is "exactly how sexual predators get access to their victims."
The group wants Target to have separate facilities for men and women, but also have a single occupancy unisex bathroom option for the transgender community and for those who like using the bathroom alone.
What's missing in the debate, Cornell said, is Target already has those options in most stores. He said it's a priority to make sure all stores have a family bathroom option in a addition to a men's and women's room.
This week, the Justice Department sued North Carolina, seeking a court order declaring the state's bathroom law discriminatory and unenforceable.
On Monday, California lawmakers passed legislation requiring all single-stall bathrooms to be open to people of any gender.