Attorney-General Yvette D'Ath confirmed on Thursday she had instructed the Director of Public Prosecutions to lodge an appeal on behalf of the Queensland Police Service (QPS).
Mr Lacey says he was "truly outraged" by the move.
"First Nations people deserve to be treated with dignity and respect and to have the same human rights as other citizens; but this does not appear to be the case in this instance," the mayor said in a statement.
"Our community are feeling discriminated against, very let down, and angry.
"The State Government ought to be ashamed."
Federal Court Justice Debbie Mortimer awarded $220,000 in damages to Palm Island man Lex Wotton and two of his family members in December 2016, after she found police were unlawfully discriminatory in their response to the death of Cameron "Mulrunji" Doomadgee.
Mr Wotton brought a class action on behalf of Palm Island community members for the pain they endured in early-morning raids by officers in November 2004.
It followed a series of riots by residents after Mr Doomadgee's death, which was deemed an accident even though he had four broken ribs and his liver was almost severed in two.
Justice Mortimer found the use of the QPS Special Emergency Response Team in the raids was "unnecessary, disproportionate and undertaken as a show of force against local people who had protested about the conduct of police".
Mr Lacey says the community was looking forward to moving past the ordeal, but are now "back where we started".
"I believe if we were a white community these outcomes would've been very different," he says.
On Friday, Lex Wotton said he was surprised the police didn’t want to put “this whole saga” behind them.
“They’re not taking any responsibility on their part,” he told NITV News.
“According to them it’d be a normal practice for the Queensland police to go into any community, whether it’s black or white, and do what they did to Palm.
“If it’s not nipped in the bud now, their behaviour, it just gives them the license to go into any community… and do what they did.”
Police Commissioner Ian Stewart said on Thursday he was grateful the appeal had been lodged with the Federal Court.
"The appeal is based on, I believe, sound legal grounds, but that is to be tested through that process," he said.
Commissioner Stewart said the exact grounds for the appeal would become known once the matter came before the court.
While the grounds for the appeal are yet to be revealed, Mr Wotton says he’s confident the initial ruling will stand.
“I’m not going to worry too much about it,” he says.
“I was pretty confident that we were going to be successful the last time, so just keep that same positive mood I suppose and just wait for the outcome. “