The Australia First Party urged members to rally at Cronulla Beach to call for charges against white rioters to be dropped, accusing police of failing to arrest "the Middle Eastern men responsible for nights of retaliatory violence".
Kevin Schreiber, the mayor of the Cronulla Beach council, urged Australia First on Thursday to stay away on 26 January, when up to 25,000 people are expected to gather for national day celebrations.
The fireworks and Opera by the Beach planned for Cronulla on Australia Day would be a family occasion, he said, condemning any attempts to raise racial tensions.
"This council does not support these views and believes our community will rise above their antics for an incredible day of celebration," he said.
The Cronulla riot involved whites, some of them draped in the national flag, attacking people of Middle Eastern appearance in order to "reclaim the beach" after two lifesavers were beaten up.
The riots led to retaliatory attacks, mainly by ethnic-Lebanese men, in which churches, shops and cars were trashed.
Several of the whites have been refused bail as they await trial for their part in the violence, while a 24-year-old Lebanese-born man has been jailed for three months for burning an Australian flag at a surf lifesaving club.
"They're trying to stir up trouble. They're trying to incite violence between white Australians and ethnic Australians"
Abdul El Ayoubi,
Lebanese Muslim Association spokesman
But a statement on the Australia First website said "patriotic Australians should peacefully assemble in Cronulla on 26 January to register their disgust with selective policing".
The Australia First Party and its youth wing, the Patriotic Youth League, handed out anti-immigration leaflets and supplied alcohol during the 11 December riot, newspapers reported.
The party is not represented in parliament and both groups have been linked to neo-Nazi organisations.
Abdul El Ayoubi, the Lebanese Muslim Association spokesman, criticised Australia First for trying to use a national day of celebration at Cronulla to fuel divisions.
"I think they need to stay away," he said.
"They're trying to stir up trouble. They're trying to incite violence between white Australians and ethnic Australians."
El Ayoubi said community leaders had urged Lebanese youngsters not to respond to extremist taunts.
"We need to make sure that none of the Lebanese guys take these messages seriously," he said.