Those taking part waved rainbow flags and placards emblazoned with “Love Wins” and “Adios 377” – a reference to the colonial-era law banning gay sex that was banished in September.
According to organisers, the pride march on Sunday was the biggest since it began in 2007.
Participants chanted “we got our freedom” as they celebrated the historic ruling.
“It’s the first time we are not marching as criminals,” said Deepti, one of the organisers from the Delhi Queer Pride Group.
She added: “People are marching with freedom and zero burden.”
In September, the supreme court struck section 377 – also known as “unnatural offences” – from the statue books in India, sparking emotional scenes on the courthouse steps.
The law was introduced by the British in 1861 and carried jail terms of up to 10 years.
Critics said that though the law was rarely enforced, it was used to harass and intimidate India’s gay community.
The controversial law was briefly repealed in 2009 but was reimposed on appeal by religious groups in the supreme court in 2014.
India is now one of more than 120 countries to have effectively decriminalised homosexuality.
Participant Deepanshu Goswami said: “This parade is about happiness, happiness and happiness.”
But the gay community still faces stigma in conservative India where homosexuality remains frowned upon in more tradition communities.
Mr Goswami said: “It will take one more generation for a social acceptance but the fear factor is gone.
“I’m enjoying my life as a free citizen now.”