Bosses have admitted: "We got it wrong" after would-be participants were told that offensive placards would also be banned and that the event in Endcliffe Park in July was 'a march of celebration, not protest.'
A spokesman for Sheffield Pride said: "Pride is about protest as well as celebration.
"We are sorry for any misunderstanding regarding guidance we issued about the Pride march and accept that it may have caused offence or upset.
"We have listened to people’s views and we acknowledge we got it wrong. We had originally stated Pride was a ‘celebration not a protest’ following criticism we received after last years’ parade and event.
"We are working hard to ensure that this year’s Pride is an inclusive, respectful and celebratory event that welcomes everyone. We recognise that Pride events evolved from political protest and a movement that strives for equality and community involvement. We would never wish to censor diversity or prevent protest.
"We encourage everyone to wear bright clothing to represent the colours of the rainbow to bring a sense of celebration and visibility to the parade, however this is not a restriction and attendees can wear what they choose."
The event came under fire on Twitter after one user uploaded screenshots relating to the running of this year's festival on July 28.
The message from Sheffield Pride read: "Please note: That any group attending with Banners or Placard (sic)… will be viewed by the Parade Manager. Any that are deemed to be ‘offensive’ will not be allowed in the march."
And then in bold, the message added: ‘Please note, it’s a march of celebration, not protest.‘
An online application form on the Sheffield Pride website also stated that it would 'not be accepting any applications by Political Groups for this year's event.’
Twitter user Danny Nasr posted a screenshot of the message and wrote: ‘Pride will always be a protest, until the very last Queer on earth is liberated. Don’t need y’all whitewashing our entire struggle and history. Fuming.’
In a follow-up tweet, he wrote: ‘When we forget our history, we forget why we march every year. Yes we march to celebrate Queer culture and excellence but we ALSO march in solidarity with our siblings across the world who do not share that same privilege.’
Nasr then added: ‘When we have queer asylum seekers being deported, when trans women of colour are being killed on the streets, when gay conversion therapies are still alive and well and queer youth are suffering every day, PRIDE WILL BE A PROTEST.’
‘IF YOUR PRIDE ISN’T A PROTEST, IT’S JUST A PARTY WITH THE COPS INVITED’
The first Pride event in Sheffield was held in 2008 and the event has grown each year with police figures estimating around 16,000 people attending the daytime event in 2017.