The alternative to Eurovision, called "Globalvision", will be held on Saturday, the same day of the song contest's finals in Tel Aviv.
Pro-Palestinian campaigners say the idea for it came from the fact that they don't want to simply oppose the Israeli event but host a positive alternative.
Globalvision parties are expected in London, Dublin, the Palestinian city of Ramallah and Haifa in northern Israel, which has a significant Arab population.
No European TV channels are expected to feature the events but they will be streamed online, with organisers encouraging people to tune in instead of watching Eurovision.
Among those expected to take part is influential British musician and producer Brian Eno, along with prominent Palestinian musicians.
The event in Haifa will feature a drag queen and other performers who will fulfil the desire for the famed Eurovision kitsch, said Najwan Berekdar, one of the organisers.
She said the aim was to create an "alternative musical event that highlights the original values of Eurovision, which is inclusion and diversity."
Tel Aviv hosts the largest Gay Pride event in the Middle East every year and the city has a cosmopolitan feel.
This tolerance of homosexuality is often trumpeted by Israeli officials, who compare it to many Arab states where homosexuality is criminalised.
Critics say this amounts to "pinkwashing" -- seeking to use its pro-gay attitudes to downplay its occupation of Palestinian territory.
Israel occupied the West Bank and east Jerusalem in the 1967 Six-Day War. It later annexed east Jerusalem in a move never accepted by the international community.
More than 600,000 Palestinians live in settlements in the West Bank and east Jerusalem in communities considered illegal under international law.
"Israel is using art and culture to whitewash occupation," Berekdar said.
'Dream of Freedom'
Apart from Globalvision, Palestinians have been seeking to have their voices heard in other ways.
Madonna has received criticism for her planned performance at Eurovision on Saturday, including a plea to cancel from the mother of a Palestinian journalist shot dead by Israeli forces during protests and clashes along the Gaza-Israel border last year.
The US pop star has since said she will reject boycott calls and headline the event.
Anti-occupation NGO Breaking the Silence has also erected a billboard in Israel with the slogan "Dare to Dream of Freedom," playing on this year's Eurovision slogan "Dare to Dream".
And in Gaza on Tuesday, musicians performed in the shadow of a building destroyed by an Israeli air strike in response to Palestinian rocket fire earlier this month.
Tuesday night saw hackers succeed in flashing a fake rocket attack warning during the webcast of a Eurovision semi-final in an incident Israel's public broadcaster blamed on Hamas, the Islamist movement that runs the Gaza Strip.
There was however no comment from Hamas on the allegation.
Back in Tel Aviv, Israeli police have increased their presence ahead of the event with a spokesman saying "hundreds of police officers, special patrol units and private security guards (are) securing the beach area, Eurovillage and the area of the expo."
On stage in Tel Aviv, all eyes will be on Iceland's entry for a potential protest.
The band Hatari, who dress in so-called BDSM outfits -- bondage clothing including leather and whips -- have been critical of Israel.
They have previously challenged Israeli Prime Minister Benjamin Netanyahu to a Glima, a Nordic folk wrestling match, and could still seek to highlight the Palestinians' plight during the extravaganza.