Mr Albanese led the Rainbow Labor float with Environment Minister Tanya Plibersek and NSW Opposition Leader Chris Minns on Saturday night as the event returned to its inner-city route after two years away due to the pandemic.
This wasn't the prime minister's first rodeo. Mr Albanese also marched in 1983, five years after Mardi Gras' inception as a gay rights protest.
"It's unfortunate that I am the first (prime minister to march), but this is a celebration of modern Australia. We're a diverse, inclusive Australia and that's a good thing," he told the ABC as waved at the crowd.
"People want to see that their government is inclusive and represents everyone, no matter who they love, no matter what their identity, no matter where they live. We need to be a country that respects everyone for who they are."
Mr Albanese said partygoers needed to pay tribute to the 78ers, the Mardi Gras' first marchers, "who were thrown in jail for the simple fact of who they were because they happened to be gay of lesbian".
"We need to continue to argue for equality."
Tens of thousands of revellers made a riotous return to the rainbow road as the 45th Gay and Lesbian Mardi Gras reawakened Oxford Street in celebration of this year's theme: Gather, Dream, Amplify.
The celebration kicked off with some of the parade's most renowned floats.
Dykes on Bikes and their male counterparts led the charge, delighting parade viewers as they filled the streets with diesel exhaust and queer joy.
The First Nations float followed, trailing the motorcyclists with a ethereal rainbow serpent.
The 78ers came up their tail end on an imposing double-decker bus that advocated for the voice to parliament, an end to the war in Ukraine and answers to unsolved gay hate crimes.
Roughly 12,500 marchers on 200 floats danced, sung and celebrated their way through the spiritual home of Sydney's LGBTQI community as they commemorated the parade's homecoming.
Other Mardi Gras hits included Surf Life Saving, who strutted their stuff in budgie smugglers and beach towels, and Different Strokes Dragon Boat Club who danced to Lizzo's song About Damn Time.
Members of British girl group the Sugababes also made an appearance, boogieing to the parade and delighting viewers.
Parade participant David Mulally says the compounding impact of WorldPride and Oxford Street homecoming has elevated every aspect of the queer extravaganza.
"It's like Mardi Gras on steroids. There's 10 times more glitter, 10 times more fun, 10 times more fabulous," Mulally told AAP.
"To be able to do it all back on Oxford Street, everyone has to stop and take note of this amazing cultural thing that we have."
The celebration, which is the crown jewel of Sydney's WorldPride program, has brought visitors to the harbour city from around the globe.
Fellow float member Odirley Souza travelled from Brazil for his first Sydney Mardi Gras.
While Souza says Sao Paolo's pride party has bigger attendance, he feels much safer dressing as a shimmering butterfly against Sydney's skyline than at home.
"This parade is part of the cultural fabric of our city," Mulally said.
"It's great to be able to stop the city and show the country, the city, the world, what us gays can do."
Teal independents Kylea Tink, Allegra Spender and Zali Steggall also made an appearance, marching with Independents for Inclusion.
Lisa Anderson, who donned a waterfall of hand-sewn rainbow ribbons while walking with Queer as Woke, says the politicians' participation is emblematic of the strides LGBTQI rights have made since her first Mardi Gras in the 1980s.
"It's pretty amazing. We used to have senior political figures condemning pride but now everyone is joining in."
"You can hear everybody is happy. Everyone's you know is doing something for WorldPride."
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