As already said it's a good place to start with the facts as accurately as possible. I have always found something along the line of "Most boys have a penis" to work best. It's completely accurate and helps you to explain private parts in terms of someone's sex while still leaving the door open that someone's gender and sex may not always match, occasionally a boy will be born with a vagina.
Most kids won't ask you to clarify what 'most' means at that age, but if your child is on the ball and asks you can explain something along the lines that "it doesn't happen too often, but sometimes a girl will be born with a penis or a boy will be born with a vagina. Sometime people will even be confused and think that a boy is a girl (or vise versa) when they are a baby because of that. But the kids usually know if they are a boy or a girl and eventually they'll correct their parents as they get older if there parents made a mistake."
You may say that discussing gender and identity like that is too confusing for a 3 year old, but I disagree. I volunteer with lots of kids and have spoken with many children 3-5 who 'get' gender and sex aren't always the same. Sure there is plenty of nuisance they still are figuring out, but they understand to some level that sometimes there is a disconnect between body parts and gender and that's what matters. They will grow into the rest so long as they have parents around to answer their questions with honest answers and help to guide their understanding as they grow older.
Having said all of that don't worry too much about gender discussion when talking about physical anatomy. So long as you couch things in terms of saying that 'most girls have x' so you aren't explicitly excluding trans individuals you're fine with just giving honest answers about the child's anatomy.
As to helping kids with understanding, and accepting, trans individuals I usually work that in as much with my general "subvert gender roles whenever possible' philosophy to working with kid, as I think it's wrong to tell anyone they have to fit into a box defined by their genitalia (or their gender for that matter). I do all kind of things, like asking to wear kids jewelry, or pretending to put on makeup, and asking if I'm pretty as a male, just to subvert expectations. However, one thing that explicitly helps with demonstrating gender and sex don't need to always match is involving kids in roleplay where the two don't match up.
For example when I'm playing 'house' or 'family' or whatever the kids call it I'll often have kids suggest I should be the daddy. Sometimes I accept that, but sometimes I'll suggest I want to play the Mommy sometimes. Our play is exactly the same, other then the word they use to call me, but that's kind of the point; that regardless of someone's gender their the same person and should be treated that way. I may look (and yes identify) as a man, but that doesn't mean that someone that looks or acts like me may not end up being a women.
Sometimes I also get kids responding with "You can't be the mommy, I want to be the mommy", to which sometimes I'll suggest they can be the daddy, and sometimes I'll suggest the baby can have two mommies instead of a mommy and a daddy and ask if they want to be mommy or mama. Most kids usually say no when I ask if they want to play the role of someone that is a different sex then them, and that's perfectly fine (most people prefer to identify as their gender, which will usually be the same as their sex after all), it's less important that they actually play that role as they know that I considered it perfectly fine and normal that, if it felt right to them, they could be that gender and it would be okay.
You can also be more explicit as the kids get a tiny bit older. For example here is a conversation I had with a child who was only four years old, who by the age of 5 had absolutely no problem understanding and discussing the question of gender separate from sex. I tried something similar to the above conversation just a little after her 6th birthday party and this time she gave me an exasperated sigh when I said I could be a girl and told me "No, you said you felt like a boy and you didn't think it would change so you can't be a girl now", which I feel shows she has mostly gotten the concept of how gender identity works now.
As a side note as was correctly pointed out in a comments on that discussion I made the mistake at one point by saying that someone may "decide to live like a girl", which implied that it was a choice when I probably should have said something more along the lines that they realize they were a girl. It's good to try to avoid making mistakes like that which implies being trans may somehow be a choice. Having said that it's okay if you sometimes, as I did, make a mistake when describing things and don't say it perfectly. Gender and sex can be complicated and even adults can fumble on describing it sometimes, but your child will figure it out so long as they have parents who are being open and trying their best to provide the child with good clear information.
I've also been even more explicit with a child by asking "do you feel like a boy or a girl?" So far all but one has said a gender that matched their sex, and that one that doesn't always agree is usually the same as their sex and I suspect they're just exploring the concept of being another gender, I'd say there is a high chance the child will be cisgender when they grow up. However, I give them space to explore being a 'he' for a bit of time without judgement when they say they are a boy, and if my guess is wrong and the child end's up being male, or some other gender identity, well I hope that they will have an easier time with coming to understand and express that fact because they know I clearly will support them and help them to explore their gender identity whenever they express they feel they need to.
As a side note I'll also remind you that some people are not a boy or a girl, but have some other complicated gender identity. I have also discussed this with kids younger then 5, though generally it's easier to touch on the concept of trans first and bring up other gender identities after you have touched on the concept that gender and sex don't always match a few times, just to give them a better starting groundwork for understanding that someone may be a boy one day and a girl the next, or neither of them.
ps. Yes I realize this is an old question and your child is likely old enough now to render the question moot for you. but it was a good question and I felt it would be useful for others who find this question to have another detailed answer.
