Organisers of Toronto's annual Gay Pride parade have reversed a decision to ban use of the phrase "Israeli apartheid" in the event.

A bitter row involving back-and-forth allegations of censorship and antisemitism has raged ever since a local activist group, Queers Against Israeli Apartheid (QuAIA), announced its intention to march in the July 4 parade.

Jewish groups, backed by several prominent politicians, convinced Pride that QuAIA was violating Toronto's anti-discrimination policies. Several weeks ago Pride organisers ruled the group could march, but not under its name.

Now, faced with a huge outcry, Pride officials have relented, ruling that QuAIA could take part under its banner but had to agree to abide by the city's Declaration of a Non-Discrimination Policy. The anti-Israel group hailed it as a victory against censorship, but Jewish groups said their resolve was strengthened.

"We are more determined than ever to galvanise a large number of marchers for the parade," Justine Apple, executive director of the gay and lesbian Jewish group Kulanu told a press conference.

"We will not be bullied from attending our parade. Groups that bring messages of hate cannot be given licence to hijack the parade and turn it into a propaganda tool for such anti-Israel venom."

Commentators are now expecting a confrontation on the day of the event.