Most Rev Justin Welby said the advice, distributed to 4,700 head teachers, sought to prevent bullying and was not about "sexual ethics".
The leader wrote for the Anglican Communion News Service on Monday after several conservative Christian figures suggested the Church was sending a liberal and damaging message about gender identity.
Archbishop Justin said: "The Church of England is committed to an education that enables people to live life in all its fullness, and fulfils the words of Jesus in John 10:10: "I came that they might have life, and have it abundantly.
"This guidance helps schools to offer the Christian message of love, joy and the celebration of our humanity without exception or exclusion."
His comments came after Christian Concern warned the new advice marked a "missed opportunity" to provide clarity in a culture marked by gender "confusion".
Tim Dieppe from the campaign group told Premier: "The Church shouldn't be encouraging people to transition their gender, particularly children.
"People cannot legally change their gender until they're 18-years-old and I don't know why the Church is going out of its way to encourage gender reassignment."
Guidance, contained in the Church of England's new Valuing All God's Children report said nursery and primary school children ought to be free to try "the many cloaks of identity" without being labelled or bullied.
It also said: "Children should be at liberty to explore the possibilities of who they might be without judgement or derision.
"For example, a child may choose the tutu, princess's tiara and heels and/or the firefighter's helmet, tool belt and superhero cloak without expectation or comment.
"Childhood has a sacred space for creative self-imagining."