The bills were submitted by MK Eliahu Gabbay (National Union-NRP) and Shas MKs.
Forty MKs voted for Gabbay's bill and 23 opposed.
The Shas bill is more comprehensive and calls for a ban on pride parades throughout the country. The bill was also approved, with 41 MKs voting for it and 21 opposed.
The Prime minister's office stated that "Prime Minister Ehud Olmert does not think that Jerusalem is the appropriate location for holding gay-pride parades due to the special sensitive nature of the city, although he believes that such matters should not be limited by law."
Shas Chairman Eli Yishai said that "the situation dictates this bill. It is inconceivable that small and delusional groups, through PR moves, will have a harmful affect on different cities, and those who wish to desecrate Jerusalem should be denounced in particular."
In the session, MK Gabbay said, "The freedom of expression is not the freedom of incitement, it's not an invitation to provocation… Those who want to allow such a parade in Jerusalem confuse freedom with anarchy.
"Jerusalem has a special status as the capital, and as an international city that is important to the three religions. Some people… want to destabilize the relations between the communities instead of contributing to building joint and harmonious life in the city."
According to the MK, "Each person's orientations are his own business and belong to the private realm, as do homosexual tendencies. There is no need to display them in public... The bill is meant to prevent bloodshed and internal war and to bring about calm, for the sake of tourism and the city's economy, which has suffered badly so far.
"The confrontations that have surrounded the parade so far dishonored Jerusalem – our capital, and hurt its standing in Israel and the world."
Meretz faction chair, Zahava Gal-On said in response to the bills: "The government has revealed the extent of its ineptness by allowing the coalition members to vote freely, banning the gay parade in Jerusalem and thereby denying the gay community's freedom of expression.
"A double-sided sword has been turned toward the community. The Knesset is crazy, with a crazy government where the tyranny of the majority is more important than human rights," she added.
Other Meretz MKs also reacted to the proposals. Avshalom Vilan agreed with Gal-On: "This is a disgraceful time for the Knesset. The law is anti-constitutional and we must exert efforts to ensure that the legislation procedure does not go any further."
MK Chaim Oron said: "The Knesset is irresponsibly legislating laws that violate basic rights. The problem lies not with those who proposed the bills, who don't understand the basic rules of democracy, but with the government and members of the coalition who have joined forces to pass bills that no other democratic country would approve."
"The bill proposal is very dangerous. Looking past the pride parade this creates a precedent where Jerusalem is the only city where freedom of speech answers to the will of the mayor. I feel that we and democracy in general are being harassed and we will continue our struggle," said Open House chairperson Noa Sattath.