Due to the divide created the previous year by the Lesbian Solidarity March, the Lesbian/Gay Men’s Pride Alliance disbanded. With the leadership of Doug Moore, Lambda Pride formed and took over the task of planning Pride. Lambda Pride filed for 501(c)(3) status, established a board of directors, and brought about many changes to the annual event that would shape the direction it took. As previous organizers had done, Lambda Pride submitted a request for the mayor to proclaim a Gay Pride Week and Lesbian Solidarity Day. The request was denied; Mayor Wilson’s office responded that they did not issue proclamations on issues of religion or sexual preference, although many proclamations had been previously issued for religious groups. The parade was held on June 13th and the route changed – now starting and finishing in Balboa Park. The parade grew with contingents and approximately three thousand attended. The rally included more speeches and awards, and featured more performances than previous years. The Great American Freedom (GAY) Band of Los Angeles led the parade in its first year of participation. 1981 was also the first year that Pride would include a festival, which occurred on Juniper St. between Fifth and Sixth Avenues. The celebration featured food vendors, games, performances, and alcohol, which was free since Lambda Pride had not yet acquired a license to sell.
For the first time, an organized group of protesters picketed Pride events that year. Half a dozen people associated with the Moral Majority, a national right-wing Christian group, provoked celebrators and passed out literature condemning homosexuality. The police department did not interfere because the parade, rally, and festival all occurred on public property. The Lesbian Solidarity March occurred again for the politically inclined, and on June 28th, Tijuana held their first gay pride event, a beach party organized by Frente Internacional de Garantias Humanas de Tijuana (FIGHT). On a more somber note, 1981 marked the start of the AIDS crisis in the United States, which would devastate the gay community for years to come.