The protest will be staged by the NoToPope Coalition of Christians, atheists and gay groups during Catholic World Youth Day celebrations expected to draw hundreds of thousands of pilgrims to Sydney next month.
"We will march to be with the pilgrims to hand out condoms to the pilgrims, the Catholic youth," spokeswoman Rachel Evans told a news conference.
"(We will) say to them, 'Take up the campaign within the Catholic church to allow the Catholic church to promote condoms'," she said.
The pope condemned millions of people worldwide to getting AIDS through his anti-condom policy, Evans said.
Apart from condom use, the peaceful demonstration would also protest the pope's stance against homosexuality and abortion, she said, describing the pontiff as "a bigot" over same-sex relationships.
A pastor from Sydney's Metropolitan Community Church, Karl Hand, said the pope was misrepresenting Christian views.
"I'm compassionate towards people who need condoms, who need abortions, who need all sorts of recognition of their relationship and it's just not being provided by this massive worldwide church," he said.
"A lot of the views being taken up by the pope are anti-humanity in general, so that's upsetting."
The coalition includes the Metropolitan Community Church, Atheists Sydney, Community Action Against Homophobia and the Socialist Alliance, among other groups, the statement said.
The coalition plans to hold a public rally in the city on July 19 and then march toward Randwick Racecourse, where pilgrims will be gathering for a papal mass the next day which is expected to draw 500,000 people.
The five-day celebration of Catholic youth has been billed as a major boost to the economy of Australia's largest city, attracting up to 125,000 international visitors.
But there has been a stream of grumbles over the event's cost, its impact on businesses as well as the inconvenience it will cause the city's residents.
The coalition said it would also protest state funding of almost 110 million dollars (104 million US) for an event staged by the Catholic Church, saying it should be spent on community services instead.
About 26 percent of Australia's 21 million people described themselves as Catholics in the most recent census, while 19 percent said they had no religion.
Pope Benedict XVI is due to arrive in Australia on July 13 and will take a four day holiday before joining the World Youth Day celebrations culminating in the papal mass on July 20.
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