Homosexuals are exposed to a great deal of discrimination and prejudice: Identifying as homosexual remains difficult in today’s society. The purpose of this paper is to review current research on the development of homosexual identity, focusing on internalized homophobia and coming out. The development of homosexual identity is an important factor to prevent mental health problems, and overcoming internalized homophobia is indispensable in this process. Although emotional connections with others are important in the development of an individual’s identity, internalized homophobia decreases the quality of personal relationships. Coming out has historically been considered an indicator of the development of one’s sexual identity, but this is now being questioned. The act of coming out may be less important than the personal significance of coming out. Many models of sexual identity development are being proposed in international research, but there have been few studies on homosexuality in Japan. Furthermore, although gay, lesbian, and bisexual individuals are often treated as a single sexual minority, we should pay attention to each of these distinct groups. Coming out and internalized homophobia are related to the development of individuals’ homosexual identity, but these individuals are also susceptible to cultural and environmental factors and trends. While assessing these differences, it is important to clarify the process and psychological background of coming out, and how homosexuals overcome internalized homophobia.