"While there have been some gains made, there still is not enough respect; progress needs to be made on homophobia," said Kiendra Penelope, 40, a cross-dressing dental surgeon.
The march was part of similar demonstrations taking place around the region and across the world this weekend.
The sexual orientation of gay, lesbian, bisexual and transgender people is the third most common cause of discrimination reported to authorities in Mexico's sprawling capital, according to the Anti-Discrimination Council.
Mexico City legalized same-sex marriage in 2009, but only two other states, of 32, so far have followed its lead.
Yet in 2012, Mexico had one of the worst rates of hate crimes against LGBT people, due to their orientation since 1995.
A total of 86 LGBT people were killed in crimes authorities said were due to homophobia, a study by the People's Coalition Against anti-Gay Hate Crimes.