Organisers estimated around a quarter of a million people turned out to watch the colourful spectacle, as some 180 floats made their way down Oxford Street, Sydney's gay hub, awash with rainbow flags and sequins.
The flamboyant displays included a giant sparkling gold women's shoe inspired by Andy Warhol.
"From pure celebration and creative self-expression, to floats with a wild and witty protest call to action, the 2017 Sydney Gay and Lesbian Mardi Gras Parade will be bursting at the seams with pride and passion," said Sydney Gay and Lesbian Mardi Gras chief executive Terese Casu.
The event grew out of a political protest in 1978 and is now one of the biggest of its kind in the world.
Creating equality has long been a cornerstone message of the Mardi Gras and Casu said the parade wanted to celebrate "how far Australia has come in accepting and embracing its LGBTQI - lesbian, gay, bi, trans, queer, intersex - communities and what positive steps there still are to make".
This year the Australian Rules football league made history with the introduction of an national women's competition, which included the first openly gay players at the elite level.
Heralded by many in Australia as a pioneer for inclusivity in a traditionally male-dominated sport, Sydney's women's Aussie Rules league paraded a float with the message that there is "no place for discrimination in sport".
"We're proud, there is a hundred of us marching tonight, and we don't really care if people are gay or not," said 35-year-old Jemma Still, the organiser of the float.
"It shouldn't be something we are still talking about but unfortunately we are," she said, referring to discrimination sport.
Despite having a vibrant gay population, same-sex marriage is still illegal in Australia with the country seen as lagging behind other nations.
Last year the upper house Senate rejected a government proposal for a plebiscite on the issue, with opponents arguing it would be expensive and spark divisive debate.
They instead favour a free vote in parliament, a move supported by many gay rights campaigners.
