A military show was cancelled after town hall chiefs withdrew funding, because it didn't meet their "diversity criteria".
The eigth annual Liverpool Military Show was due to take place at Walton Hall Park on Saturday, and featured a memorial service to fallen war heroes.
But the event was scrapped at the last minute when council officials pulled out of providing £8,000 towards the costs.
Organisers say they were informed that the show did not "score highly enough" on Liverpool City Council's "diversity scale" to justify funding from the arts and culture budget.
Just 10 days earlier, Liverpool City Council had funded their annual "IDAHO" Gay Pride festival, celebrating the "International Day against Homophobia".
Town Hall bosses have also agreed to provide £80,000 of funding for the Liverpool "Homotopia" festival in August.
A spokesman for the Liverpool Military Show said the accusation that it failed to meet equality and diversity standards was incorrect, adding that a parade had been due to include a transexual soldier.
The spokesman said: "The council seems to be at odds over how Liverpool wants to portray itself as a city."
The cancellation in an embarrassment to organisers who had a range of armed services personnel and equipment primed to take part.
Last year's show helped raise around £13,000 for the Army Benevolent Fund, Combat Stress, St John Ambulance and the Army Cadet Force.
The annual show was set to include demonstrations from all three forces and had become a favourite with families who could have their faces painted, look inside high-tech helicopters and motorcycles or go paintballing.
Veterans, children and cadet forces all gained free admission while pensioners were allowed in for half price.
Ministry of Defence spokesman Greg Stringer said: "There were enough assets for the show to go ahead this year.
"Had the organisers not been forced to call off the festival, we would have provided everything necessary to create a fantastic military spectacle."
Liverpool war hero Peter Dunning, who lost both his legs while serving with the Royal Marines in Afghanistan, labelled the decision "a disgrace".
He said: "The council are just afraid of a Muslim backlash, similar to the protests in London last year.
"It is stupid because the British military is an institution enshrined in our heritage, which has always been made up of foreign soldiers of all colours, race, creed and sexual persuasion."
A spokesman for Liverpool City Council confirmed that the event had been cancelled, but said that a "range of issues" had contributed to the decision.
He added: "We did offer some replacement funding, but organisers said it was too late to reinstate the event.
"We hope that an arrangement can be made for future military events in Liverpool."
fugazi johannessen, liverpool around 1 year, 8 months ago