SINGAPORE, June 8 (Reuters) - One of Asia's largest gay and lesbian festivals held annually in Singapore has been banned after authorities in the conservative city-state ruled it was "contrary to public interest".

It is the third time in six months Singapore has outlawed a gay event, signalling a marked change in government policy after it had recently shown greater tolerance towards homosexuality.

"Police assessment is that the event is likely be organised as a gay party, which is contrary to public interest in general," a police spokesman said on Wednesday.

"Nation.05", a gay dance party which has been staged yearly in Singapore since 2001, will be moved to the Thai tourist island of Phuket. Last year's party drew more than 8,000 revellers.

"I don't know why there has been a sudden change in the government's sentiments. This is a direct contradiction to previous calls for embracing of diversity," said organiser Stuart Koe, who runs Fridae.com, Singapore's main gay and lesbian Web site.

"We are very disappointed that the government is sending a very strong signal that a big minority of its population is not welcomed. That is very homophobic," Koe told Reuters.

Singapore's gay community has only recently enjoyed greater freedom after former premier Goh Chok Tong announced in 2003 that homosexuals could hold key positions in the civil service without fear of discrimination. But the gay community has come under fire in recent months after a junior health minister in Singapore said a gay and lesbian festival in August last year may have led to a surge in the number of local AIDS cases, a remark that outraged gay activists.

Although Singapore has one of Asia's lowest levels of HIV infection, the number of new infections hit a record high of 311 cases in 2004, up 28 percent from 2003. A third of the newly diagnosed cases were gay men, the health ministry has said.

Gay activists say the remaining two-thirds appeared to be heterosexual men who caught the illness from prostitutes in nearby Southeast Asian countries, such as Indonesia's Batam island, which is just an hour's boat ride from Singapore.

In March, the government rejected an application for an AIDS concert, citing concern over its gay performers. In December 2004, police threw out plans by gay activists to hold a Christmas dance party, saying the event went against the "moral values of a large majority of Singaporeans".