I am standing on the steps of the Sydney Opera House on a glorious sunny afternoon in early February, surrounded by 22,000 revellers. Descending from the sky on a crane is a Sister of Perpetual Indulgence, the order of gay male nuns. Dressed in a fresh-starched habit and clutching a pink rosary, his blessings ceremonially launch the Sydney Gay & Lesbian Mardi Gras - three weeks of non-stop parties, plus parallel sporting and cultural festivals, culminating in the grand parade and post-parade party.

During Mardi Gras, Sydney becomes the queerest place on Earth - the closest thing to Homo Heaven. Mardi Gras totally dominates the city. Yet heterosexuals don't feel threatened. They join in. More than 600,000 line the streets to watch the night-time parade of glittering floats and costumed marchers. So many straight people want to go to the end-of-parade party that the organisers have had to restrict sales to gay outlets. Mardi Gras is, my dear, The Event in the Sydney calendar. Everybody who's anybody wants to party with the faggerati.

So many parties, so little time. Will it be the Blue Hawaii Pool Party? The theme is South Pacific, as Victoria Park swimming pool is transformed into a tropical island paradise and everyone splashes around in their bikinis - even the boys.

Or should I wait for the Chinese New Year Party? To the sounds of Chinese techno, the city's Asian gay community is celebrating The Year of the Rabbit in Sydney's stunning oriental gardens, reputedly the finest outside Beijing.

Or how about the Harbour Party? Staged in the Royal Botanic Gardens, on a spit of land jutting out into Sydney Harbour and overlooking the Opera House, this has to be the most spectacular dance party location in the world. On a balmy summer's evening, as tugboats spray water jets 100 metres in the air, 3,500 gorgeous fags and dykes party the night away. Showing off their bronzed, gym-honed bodies, most are stripped to the waist.

Call me greedy, but I did all three. Afterwards, I squeezed in Fair Day as well. This open-air Oz Pop festival and picnic-in-the-park pulls in 60,000 people. But the side events grabbed my attention most, especially the dog drag show - it was toss up between the spike and leatherette SM bulldog and the poodle in pink tights and tutu. Ms Fair Day competition was also a hoot. More drag. This time human, though some may disagree. Boys dressed as girls dressed as boys. So confusing, but that's part of the fun.

As for the costumes: how on earth did he/she manage with those four-foot high sequinned platforms and that three-tiered wedding cake hat with a groom and groom on top? As we all know, queens love to shop, and Mardi Gras has a tailor-made event to fulfil every big spender fantasy. Shop Yourself Stupid is nirvana for shopaholics, and all for a good cause. More than 300 of Sydney's most stylish stores join forces to donate a share of the day's takings to the Aids charity, the Bobby Goldsmith Foundation. Sixty drag queens on stilts mince up and down the main shopping thoroughfares all day, urging everyone to "Spend! Spend! Spend!" The result: $80,000 raised for the care of people with HIV.

In Sydney, the pink dollar has real clout. Mardi Gras is sponsored by the national airline, Qantas, and by the national telecom corporation, Telstra. Bus shelters and billboards all over the city advertise the festivities with the slogan "Gay Icon", a reference to the official online Mardi Gras guide, which is sponsored by the leading daily newspaper, Sydney Morning Herald. Big bucks are at stake. Mardi Gras earns nearly $100 million for the local economy, generating more income than any other cultural or sporting event in Australia.

Much more than a three-week party, Mardi Gras also offers unexpected treats for Mr and Ms Butch. The sports festival is a mini-gay Olympics, ranging from big girl's blouse events like softball and golf, to the hardman sports of ju-jitsu and triathlon.

For those who love the wilderness, the Southern Cross Outdoors Group organises special Mardi Gras "queer treks" in the nearby Blue Mountains - Australia's version of the Grand Canyon. I joined 50 designer-label-wearing gay bushwalkers for an 8km hike at Wentworth Falls, retracing the steps of Charles Darwin in 1836.

For the cerebrally-minded, Mardi Gras has some absolute gems. The cultural festival brings in audiences of 250,000, and showcases some brilliant avant-garde performances. Move over Xena! Razor Baby, performed by the dykon aerialists of Club Swing, fuses martial arts, dance, gymnastics and trapeze dare-devilry, backed by an all-women big percussion band.

If it's laughs you want, look no further than the Mile-High Club: cabaret hosted by Pam Ann, "the world's greatest celebrity air hostess". And for the highbrow, there is the Opera House. I made sure I didn't miss the stunning homoerotic production of Billy Budd, with its semi-naked, all-male cast tenderly vocalising Britten's tragedy of sexual repression and class privilege.

But all these events are just foreplay, leading up to the orgasmic grand finale: the spectacular street parade of floats and marching ensembles, followed by the mother of all dance parties. Tonight is that night. It is 8pm and getting dark. Rev Fred Nile (Australia's Mary Whitehouse) is still praying for rain. But God refuses to punish us sodomites. Who cares? We're here to party. And so is half of straight Sydney. Mums and dads, and loads of kids. Japanese tourists. Mardi Gras transcends all barriers.

And they're off! More than 200 entries, led by Dykes on Bikes, the 30-strong, leather-clad lesbian motorcycle club. On come the massed ranks of the marching ensembles: the Bassey Bitches (30 Shirley look-alikes belting out Hey, Big Spender), the George Michaels (40 women dressed as LAPD officers escorting a George Michael clone) and the Monicas (50 Lewinsky impersonators wearing stained blue dresses and waving moist cigars).

Then there's some political satire with a float featuring a two-faced caricature of Labour State premier, Bob Carr, condemning his failure to deliver same-sex partnership rights. Can satire change the world? A couple of months later, Carr granted legal recognition to gay couples. Poking fun at oppressive religion, the Temple of More Men float is a take-off of the Mormon Church, featuring the "More Men Tab-of-acid" male choir singing "hims", shouting "A mens!", and "promoting faith in disco devotion".

Two dazzling hours later, the parade is over and the party begins. Twenty thousand people pour into four aircraft-hanger-sized pavilions at the Showgrounds for the biggest queer rave in the world, lasting from 10pm to 10am the next morning.

The Big Top has an "Aloha Dot" South Sea islands theme and hosts the costume pageant, presided over by Jean-Paul Gaultier. With giant wind machines, The Dome is the "Temple of Thunder". Topping both is the Horden Pavilion - "Satellite of Love" - where a towering silver laser gun sends shafts of shimmering light ricocheting off the walls, ceilings and floors.

But the big daddy of them all is the Royal Hall of Industries, which hosts a staggering 9,000 party-goers. Here the theme is red: "Vegas is Burning". Probably the greatest light show in the world, its 5,000 spots and lasers arc the colours of the rainbow flag across the dance floor. Just when you think nothing can top this, disco diva Dannii Minogue descends from the rafters on a sparkling silver crescent moon, belting out her chart-topping hits to the accompaniment of 20 drag queens, 70 dancers and incandescent pyrotechnics. Unforgettable!

Mardi Gras 2000 begins with the February 11 launch party and culminates with the parade and post-parade party on March 4.

The practicals

Peter Tatchell flew to Sydney with Air New Zealand (020 8741 2299), whose return flights start from £720, with an optional stopover in Los Angeles. He stayed at the Southern Cross Hotel (double rooms from £95 a night). Man Around Travel offers Mardi Gras packages from £699, including return flight, seven nights' accomodation and a Mardi Gars party ticket (020 8902 7177). Check out the Australian Tourist Commission (www.australia.com) and Mardi Grass (www.mardigras.com.au)