The ban was announced after last year's Pink Dot event in effort to stop "foreign entities" from interfering in domestic issues.
"For events like the Pink Dot, foreigners are not allowed to organize or speak at the events, or participate in demonstrations," the Ministry of Home Affairs said in a statement announcing the new policy. "These are political, social or moral choices for Singaporeans to decide for ourselves. LGBT issues are one such example."
Pink Dot, which plays on Singapore's "Little Red Dot" nickname, is a non-profit that promotes LGBT equality in Singapore and has held an annual celebration for the past eight years. Pink was chosen because it is the mix of the colors of Singapore's national flag -- red and white.
"Pink Dot stands for an open, inclusive society within our Red Dot, where sexual orientation represents a feature, not a barrier," the group says in its mission statement.
Singapore is a socially conservative country and has long been criticized for its anti-LGBT policies. Under Singapore law, sex between men is punishable by up to two years in jail.
The ban on foreigners at the celebration meant only Singaporeans and permanent residents could participate. Barricades and police checkpoints were in place to check citizen identification cards.
"Pink Dot 2017 organizers have no choice but to adhere to this regulation," the group stated in response to the ban. "Unfortunately, this was a decision that was taken out of our hands."
The policy also barred international corporate sponsors.
"Singapore's demand that foreign companies stop sponsoring Pink Dot encourages corporations to discriminate against LGBT people," said Brad Adams, Asia director at Human Rights Watch. "This is not only reprehensible toward LGBT people, but to corporations that have pledged to eliminate bias in their corporate practices."
Pink Dot 2016 was sponsored by corporate giants like Google, Facebook and Goldman Sachs. As a result of the ban, organizers were forced to rally Singaporean businesses in order to fund the event. The group 'Red Dot for Pink Dot' was established to organize funding from local businesses.
"The Red Dot For Pink Dot campaign aims to be the platform where other Singapore business leaders from every industry can lend their support to both inclusiveness and diversity in Singapore," the organization said in a statement.
Pink Dot signed 120 local sponsors, securing adequate funding for the event.
Saturday's Pink Dot gay pride rally attracted 20,000 attendees, organizers said. Attendees peacefully rallied with homemade pink signs with slogans such as "Love has no boundaries! Love everyone as they r!"
Participants sang a rendition of Singapore's national anthem "Majulah Singapura." As nighttime fell, participants held up colored lights to create a rainbow in a sea of pink lights.
"We also hope this will send a message to everyone that the #FreedomtoLove is not a foreign value but one that all Singaporeans share," the group tweeted.