The annual event, called the Tyrone Volunteer Commemoration, takes place in August and remembers the republican dead of the county.
It will mark the deaths of IRA men Seamus Harvey and Gerard McGlynn, who died in 1973 when the car bomb they were transporting detonated early.
Unionist politicians, who object to the parade, have described it as an attempt to "rewrite history" and claim local people have also voiced concerns.
They will meet the parades watchdog on Tuesday calling for action to be taken.
West Tyrone DUP MLA Tom Buchanan said: "This parade to commemorate two IRA terrorists killed by their own bomb has caused a huge amount of hurt and upset to the wider community in the Castlederg area.
The Parades Commission must be fully aware of the devastating impact this proposed parade has already had because several hundred people have already contacted the Commission to register their opposition
"It is abundantly clear to everyone that this parade has hugely increased tensions in the Castlederg area. It is therefore incumbent upon republicans to withdraw their application if they are to live up to their own words. If the application is not withdrawn then the only option is for the Parades Commission to act."
Sinn Féin's West Tyrone MLA Barry McElduff responded to the criticisms by pointing to loyalist parades held in the town without objection.
"Year in, year out, Castlederg witnesses a disproportionately large volume of loyalist/Loyal Order parades which proceed through the commercial centre of the town without hindrance or objection from the resident majority nationalist/republican community, despite the frequent and prolonged inconvenience caused throughout the marching season," he said.
"The Tyrone Volunteers' Commemoration is always a poignant and dignified event held to honour the memory of the republican dead of this county, and the organisers will ensure that this continues to be the case."
A decision was made last year to rotate the parade venue with Castlederg chosen for 2013.
It is due to be held on Sunday 11 August.