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Cross-dressing is prohibited when used as a disguise to invade someone else's space.

Babylonian Talmud Nazir 59a (2nd - 4th C CE)

"A woman should not put on the apparel of a man." (Deuteronomy 22:5) What does the Torah mean by this verse? You might think that it simply means that a man may not wear a woman's garment and a woman may not wear a man's garment. But behold, it has already been said [by previous commentators in reference to this verse] that it is completely off-limits! But there is no to'evah here [it is not a completely off-limits behavior]! [Therefore], the verse must mean that a man may not wear women's clothes in order to sit amongst women, and a woman must not wear men's clothes and sit amongst men.

Further explanation of Nazir 59a.