Up to 40,000 people filled Lakemba Mosque and spilled into surrounding streets, listening to the sound of prayers being broadcast over a loudspeaker.
Wednesday marked the end of Ramandan and the start of Eid al-Fitr, a religious holiday celebrated by more than 1.6 billion Muslims worldwide.
Addressing the crowd in Sydney, Lebanese Muslim Association (LMA) president, Samier Dandan, said the rise of far-right political parties in Australia was concerning.
"It cannot be emphasised enough just how disappointing it is to see individuals who preach hate and bigotry gaining power in our elections," he said.
Prayers fill the streets of Lakemba for Eid al-Fitr @SBSNews pic.twitter.com/nbiITr8CEy — Brianna Roberts (@BriannaNEWS) July 5, 2016
"It is deplorable that such basic misunderstanding of Islam and such flagrant dehumanising of Muslims and others is allowed to frame public discourse.
"Let us not mince words: such racism and xenophobia has no place in multicultural society.”
The likely election of Pauline Hanson to the senate has been condemned by the LMA and Race Discrimination Commissioner Tim Soutphommasane, who fear she will create division in the community.
The One Nation leader has called for a royal commission into Islam and for Halal food to be banned.
NSW Premier Mike Baird also attended the event, along with NSW Opposition Leader Luke Foley and Federal Labor MP Tony Burke.
Mr Baird told the crowd at Lakemba Mosque vilification would not be tolerated.
