A group of locals who wanted the mardi gras moved back to the CBD has devised a festival that could force community groups to choose between the two events.

Rodeo manager Tricia Esdaile said a rival festival could potentially mark the end of the iconic event.

"It's not good to have competing events in such a small town," she said.

"This could have serious repercussions on the entire rodeo and its future."

The event, dubbed the Rodeo Street Festival, could see the city's dry zone lifted in specific areas, as well as community stalls established along streets and live entertainment throughout the night.

The festival's committee has held talks with liquor licensing, Mount Isa Police and Mount Isa City Council (MICC) to determine whether the event would go ahead.

The proposal will be put to council this Wednesday.

The North West Star understands the decision to create another festival came after the Mount Isa Rotary Rodeo Inc (MIRRI) committee announced the mardi gras parade would stay at Buchanan Park.

The street party was formerly held in the CBD.

But prominent Mount Isa businessman and Rodeo Street Festival committee member Albert Hakfoort said the festival was not designed to kill the mardi gras.

"That's the last thing that we want," he said.

"This is not a mardi gras. We are merely holding an event in the city for the people who would want to attend."

Discussions have been held between the two groups, as well as the Chamber of Commerce, to discuss the possibility of returning the mardi gras back to the city, but no decision made.

"The Hakfoort Group told us they were unable to help the event financially and did not have an alternative route the floats could travel down," Ms Esdaile said.

But despite the competition, Ms Esdaile said the Rodeo Committee was still working on the mardi gras' rejuvenation.

"This has put the community in a difficult place but we're staying positive," she said.

"We've still got some surprises up our sleeve and we're moving ahead with our plans.

"We want the entire community to benefit from this, not just one business."

Mr Hakfoort said the committee, which he could not yet reveal the members of, hoped residents would get behind the new event.

"This could bring the community spirit back into the city when tourists travel here to watch the rodeo," he said.

"We want tourists to leave Mount Isa with the thought that we can put on a good show."

The two events are scheduled for Friday, August 6.