Some 10,000 revellers on 144 individual floats will make the journey down Oxford Street, hub of Sydney's gay and lesbian nightlife, in a vibrant show featuring drag queens, political parodies and plenty of glitter.
"Bust out the glitter, prep those fabulous falsies and secure your leather chaps -- tight -- because Australia's biggest celebration of love and diversity is kicking off with a bang," organisers said.
This year's theme is kaleidoscope to showcase that people come in different shapes, colours and forms.
"Where last year we celebrated generations of love, this year we celebrate the diversity of the multifaceted community and our shared experiences," said the event's chief executive Michael Rolik.
"This will also extend to the communities who haven't had a presence in the parade before.
"Where last year we had a focus on women represented in the parade, this year will see a transgender and intersex float included for the first time, as part of over 140 floats that will dazzle audiences."
Among the lavish floats will be one designed by Hollywood director Baz Luhrmann in homage to his breakthrough 1992 movie "Strictly Ballroom", featuring 98 dancers and six drag queens.
"I think Mardi Gras is one of the great things that the city does," he told the Sydney Morning Herald.
"It's really, really special. And it's really unique. I don't think there's anything like it in the rest of the world."
The spectacle, in its 36th year, bills itself as the world's biggest night parade and is a major tourist drawcard, bringing A$30 million (870 million baht) into the economy in what is the city's largest event behind the New Year's Eve fireworks.
Among the special guests will be the transgender son of Cher and Sonny Bono, Chaz Bono. Born Chastity, the little girl appeared alongside her parents in the popular Sonny and Cher show in the 1970s but began living as a man in 2009.
But Bono quashed rumours that Cher would make a surprise appearance.
"She's getting ready to go on tour in March," Bono said.
Politicians are due to take part, including Labor senator Penny Wong, the first openly gay Australian cabinet member.
"I am a politician so I see it politically. It is a very important statement to the Australian community, we're proud and we're part of your community and we celebrate who we are," she told journalists.
The Mardi Gras parade, which has its origins in a 1978 protest march, is followed by the Mardi Gras Party where globetrotting New York DJ Kim Ann Foxman, Chicago's Derrick Carter and French innovator Leomeo will entertain.