New South Wales state police said they have sought legal advice about using powers that would allow officers to search and demand identities without cause for those attending the rally on Sunday.
The special powers have not been used since race riots in 2005.
“If they fail to do so it is an offence, these are extraordinary powers,” Acting Commissioner Dave Hudson told a press conference on Friday.
Police expect more than 400 people to attend the rally in Sydney’s Hyde Park as tensions rise following the conflict in Israel and Gaza, which has claimed more than 2,800 lives.
The plan for the demonstration has sparked debate after footage from a Monday rally by the same group showed people chanting “gas the Jews”.
Organisers said members of a fringe group of “vile” antisemites attended and were told to leave.
The protest organiser, the Palestine Action Group Sydney, have said the rally will go ahead without police authorisation, and it defended the right to demonstrate after calls from various politicians for the event to be cancelled.
Countries across the developed world are curbing pro-Palestinian protests out of concern the Israel-Hamas conflict could trigger violence at home.
In London on Friday two Jewish schools decided to shut their doors amid calls for mass demonstrations in support of Palestinians.
On Tuesday former Hamas leader Khaled Meshaal called for the Muslim world to show their solidarity with Palestinians.
In South Yorkshire, a crowd of protesters gathered around Sheffield Town Hall as two men scaled the building to replace the blue and white Star of David flag with a Palestinian one.
In Sydney, police arrested three men on Friday outside the Jewish Museum of Australia for making Nazi salutes, media reported.
“I expect, and so do NSW Police, the full extent of the law will be applied to those people,” state premier Chris Minns told a press conference.
Australia’s intelligence chief has warned about the possibility of violence and called for people to tone down rhetoric that could inflame tensions.