This year's procession of 150 floats was led by the "78ers" - a group of 186 of the original marchers and their partners, who drew rapturous cheers.
Diane Minnis, a Sydney woman in her 50s who was among the pioneers, said she never envisaged that their protest against discrimination would evolve into the annual, multicolored celebration of today that parties on well into the daylight hours of the following day.
"But we're very glad that it did because it makes being gay, lesbian, transsexual, etceteras, very visible and that's what we still need," she said.
Organizers have described this year's Mardi Gras as the largest yet, drawing thousands of tourists from across the nation and around the world.
Much of what the original protesters railed against has crumbled and the event has become increasingly mainstream.
Gay troops marched for the first time under an officially endorsed Defense Department banner and a band of Christian clerics joined the parade to distance themselves from colleagues who make moral judgments.
State laws banning homosexual acts have been repealed throughout Australia since 1978. But the revolution continues, with the federal government's anti-discrimination commission using the event to highlight that same-sex couples fall short of heterosexuals in tax and pension benefits.