A controversy over a group called 'Queers Against Israeli Apartheid' is threatening to disrupt Toronto's Pride festival. (Canadian Press)

A storm of controversy has erupted around a decision by the Toronto Pride festival to ban a group from using the words "Israeli apartheid."

The use of the words has put the Pride organizers on a collision course with the City of Toronto, which says the name of the group 'Queers Against Israeli Apartheid' violates its anti-discrimination policy.

In 2009, the city gave the Pride festival $121,000 to help defray costs.

Other pride sponsors, Jewish advocacy groups and some Toronto mayoral candidates have expressed their displeasure, as well.

But now, the decision by organizers to ban the group has led to other activists in the gay and lesbian community denouncing the action as censorship.

"Our decision to restrict the use of the words "Israeli Apartheid" was not made easily, independently, or absent of a commitment to respectful expression," Pride organizers said in a news release.

"Let us be clear, criticism of Israeli government policy is legitimate. However, the atmosphere created by the use of the words "Israeli Apartheid" in the last three years of the Pride festival are not."

On Monday, about 20 former grand marshalls of the Pride parade returned their awards as part of the growing protest.

"They have to an extent betrayed the community," said gay activist Gareth Henry, "and have betrayed me personally — my trust in Pride and what Pride stands for."

Elle Flanders, a member of the group, says the decision flies in the face of an organization that is based on "free speech and of democracy, and of trying to win our rights to speech."

Now, said Flanders, "they are turning around and saying some people can speak and some people can't speak."

But Pride said in its statement that the board "heard overwhelmingly ... that the use of the words 'Israeli apartheid' made participants feel unsafe. For that reason we asked members of Queers Against Israeli Apartheid to re-evaluate their approach when participating in Pride activities ..."

Festival organizers say the group "is not being banned from this year's festival. We are restricting the use of words and phrases that can promote a poisonous atmosphere and detract from the goal of celebrating diversity within our community."

Traci Sandilands, executive director of Pride Toronto, says the controversy is a serious threat to the festival.

"If we had not made this decision Pride would not have been able to take place. We would have had to cancel the 2010 festival, close our doors and file for bankruptcy," she said.

Protesters say they intend to make their voices heard during the Pride festival from June 25 to July 5.