The parade had some 6,000 participants

Revellers ignored heavy rain to line the route through the city's gay district and view some 130 floats.

Mardi Gras was launched in 1978 as a gay rights protest, but has since transformed itself into Australia's biggest street parade.

The BBC's Phil Mercer in Sydney says that despite its frivolous air, the parade has kept a hard political edge.

Some of the floats targeted Australia's involvement in the war in Iraq.

The recent gay weddings in San Francisco, California and New Paltz, New York were also mentioned. Gay marriage is illegal in Australia.

"We are reaching a stage where conservatives are winding back our rights," a gay rights advocate told AP news agency.

"That is what is happening in the United States."

Frivolity - and activism

The event began with an attempt to break the world record for the number of people simultaneously dancing to the Village People song YMCA.

The crowds, estimated at less than 100,000, lined the route through Oxford Street to watch the 6,000 dancing participants and floats.

One float mocked an Australian reality television show, while another re-enacted the kiss between Britney Spears and Madonna at the MTV Video Music Awards last August.

Some participants gave beauty tips for world leaders, with floats recommending "Botox for Bush" and "New Hair for Blair".

Activists also campaigned for equal rights for gay people.

Mardi Gras co-chairwoman Steph Sands told AFP news agency there were still serious issues facing the gay community, such as equal retirement benefits and general discrimination.

"We have homophobia in our schools still and we still don't have adequate discrimination laws to protect us," she said.

The parade still has strong opponents in Australia among some conservatives.