Actor Rupert Everett is leading the parade

Environmental and social issues featured strongly in the colourful and often outrageous parade which began as a gay rights protest in the late 1970s.

In particular, there were calls to allow same-sex marriages and equal financial rights for same-sex couples.

Around 7,500 people marched in the parade, led by UK actor Rupert Everett.

Hundreds of thousands of spectators lined the route, to watch floats such as one carrying 250 male Kylie Minogue lookalikes dressed in pink hot pants and tinsel.

The parade is the centrepiece of a month-long carnival that includes art exhibitions, theatre productions and sporting events.

Earth replica

The giant street party is one of the world's best-known gay and lesbian celebrations. It began as a protest movement in 1978.

This iconic event which provides visibility and pride of gay and lesbian people throughout the world, is a beacon of love, acceptance, and tolerance Marcus Bourget Event chairman

Homosexuality was illegal in the state of New South Wales and demonstrators marched in the name of basic human rights.

The BBC's Phil Mercer in Sydney says the Mardi Gras' intense political fire may have diminished over the years but the iconic event still agitates for social change.

"This iconic event which provides visibility and pride of gay and lesbian people throughout the world, is a beacon of love, acceptance, and tolerance," parade chairman Marcus Bourget told the Associated Press news agency.

Environmental concerns featured heavily this year, with a giant replica of planet Earth one of the highlights of the parade.

Campaigners also challenged the conservative government for refusing to endorse same-sex marriages.

And there was a push for gay and lesbian couples to enjoy the same financial rights as heterosexuals.

Several floats had been dedicated to politics, with Prime Minister John Howard crudely lampooned.

Opponents of the Mardi Gras often turn to a higher power to disrupt the lavish spectacle.

Christian groups pray for rain to fall on the march, although heavy downpours in recent years have done little to dampen spirits.

Our correspondent says the festival is an economic money-spinner attracting thousands of international tourists.