The city's annual Chinese New Year Parade — an extravaganza of lion dances, firecrackers and colorful floats — has been thrown into turmoil over organizers' decision to exclude members of Falun Gong, the spiritual movement outlawed as a dangerous cult in China.

The San Francisco Chinese Chamber of Commerce, which has directed the parade for nearly 50 years, claims Falun Gong followers violated parade rules against political activity two years ago when they handed out anti-China leaflets while marching.

"They don't add anything to the parade, and they violate every guideline," said Rose Pak, who represents the chamber. "We just don't want any groups that preach and do politics."

Falun Gong members accuse the chamber of discriminating against them to appease the government in China, where many chamber members have business interests.

"We see it as a clear example of persecution extending from China to U.S. soil," said Sherry Zhang, a Falun Gong spokeswoman.

This year's celebration of the Year of the Dog is set for Feb. 11. The parade typically features marching bands, schools, firefighters, politicians and community organizations. The city underwrites $77,000 of the $800,000 parade budget and provides police protection and other city services.

The parade dispute has exposed a rift within the Bay Area's Chinese American community and spread beyond Chinatown, spilling into the courts, the chambers of City Hall and the advertising pages of Northern California newspapers.

In recent years, Falun Gong has been excluded from lunar new year parades in Los Angeles and the San Gabriel Valley in Southern California by organizers who worried about damaging relations with China.

But the fight has been especially fierce in San Francisco, where nearly 20 percent of residents are of Chinese descent and where the Chinese New Year's parade is one of the biggest such events in the country, drawing hundreds of thousands of spectators.

"It's a stage for all Americans to view Chinese culture, Chinese people and China's role in the world," said David Lee, who heads the Chinese American Voter Education Committee. "Such a visible event has the power to shape hearts and minds."

Falun Gong mixes elements of Buddhism, Taoism and traditional Chinese thought with meditation and exercises that adherents say lead to improved health and well-being. Beijing banned the group in 1999 following a major demonstration outside the main government compound. Thousands of followers were detained and imprisoned.

Falun Gong has applied to participate in the city's parade every year since 2000. Falun Gong managed to slip into the parade in 2004 when it applied under the name Falun Dafa. Falun Gong members admitted a supporter handed out literature during the march but said the person was not part of the parade contingent.

Falun Gong members said they want to enter a lotus-flower float with practitioners in colorful costumes, meditating, dancing and beating drums.

"We're part of the community," said practitioner Alicia Zhao. "We want to show people the great Asian culture that we bring to this society."

Falun Gong practitioners sued on Wednesday in a bid to stop the city from funding the event, claiming the money supports religious discrimination.

Last month, Falun Gong lodged a complaint with the city's human rights commission. On Tuesday, the city Board of Supervisors passed a resolution that condemns persecution of Falun Gong but does not single out the Chinese government and takes no position on the parade dispute. The Chinese consulate had warned the board to avoid any action that would harm U.S.-China relations.

Pak denied that the chamber was discriminating against Falun Gong or doing the Chinese government's bidding. She dismissed the group's teachings as "mostly gibberish" and "hocus pocus."

Over the past week, the chamber has run large ads in the region's Chinese-language newspapers and the San Francisco Chronicle that defended its right to reject Falun Gong and denounced the group as a "homophobic cult."