Organisers passed a motion on Saturday not to invite Malcolm Turnbull, who was the first sitting prime minister to attend the last gay pride event.
Mr Turnbull, a supporter of marriage equality, backed his party's calls to allow a national vote on the issue.
But the stance has angered some who fear a vote would be divisive.
Currently, same-sex couples can have civil unions or registered relationships in most Australian states but they are not considered married under national law.
Cat Rose, who put forward the motion at the Mardi Gras parade's annual general meeting, accused Mr Turnbull of using last year's event as a "media opportunity".
Since then, she added, he had been "nothing but a conduit for homophobes wanting to derail marriage equality through a vindictive plebiscite".
"We wanted to express our disgust at his prime ministership as a community and to say that we don't need his phony friendship," Ms Rose said in a statement released on Facebook.
"For this reason we are not extending an invitation for him to attend the parade while we wait for equality."
Despite opinion polls indicating that most Australians support same-sex marriage, some believe a plebiscite - which would be expensive - could unleash a homophobic campaign.
A survey of 5,500 LGBTI Australians conducted in July by advocacy group Just Equal found that 85% opposed holding the referendum.
Instead, they want Mr Turnbull to allow parliament to vote on the issue.
This week, opponents of the referendum were backed by Australia's upper house, which blocked the government's proposal for the national vote.
Sydney's Gay and Lesbian Mardi Gras parade is one of the world's largest gay pride events.
It brings hundred of thousands of people to Australia from around the world, adding an estimated A$30m ( $22.6m/£17.9m) to the local economy.
The first march was held in June 1978, on a global day of activism to commemorate the Stonewall riots of 1969, which followed police raids on New York's Stonewall Inn gay bar.
But participants were met with police violence. This year, the New South Wales parliament apologised to the group, now known as the 78ers.
Australia's prime minister has been told he will not be welcome at next year's Mardi Gras parade because of his handling of the gay marriage issue.