"I won't lend a hand to the desecration of Memorial Day," Lieberman explained his decision. "This isn't a remembrance ceremony, but a display of bad taste and insensitivity, which offends bereaved families, who are more dear to us than anything else."
The Defense Ministry denied entry requests to Palestinians for the ceremony last year as well.
The ceremony, organized by Combatants for Peace and the Israeli-Palestinian Bereaved Families for Peace, will be held next Tuesday evening, Memorial Day eve, in Tel Aviv's Ganey Yehosha Park.
Author David Grossman and Dr. Amal Abu Sa'ad, whose husband Yaqoub Abu al-Qiyan was shot dead by police in Umm al-Hiran, are set to speak.
Last year, protesters with Israeli flags gathered outside the hall the ceremony was held at, swearing and spitting at attendees.
Lieberman's decision angered the bereaved families who are set to take part in the event, which has been held for 16 years.
"It offends me that I'm not allowed to grieve and commemorate in the way I want to," said Roni Hirshenzon, the ceremony's organizer, who lost his two sons.
Gili Meisler, who lost his only brother in the Yom Kippur War, opined that "preventing the arrival of Palestinians who are in favor of reconciliation is simply an embarrassing move."
While Ayelet Harel, a bereaved sister, said that "it is the height of rudeness to decide for us how to mark this day."