Alfreda Schmidt, who co-chairs the city's Memorial Day Parade Committee, said it "saddened us to have to make that decision."
Six groups, including two military organizations, committed to participating in a parade this year, down from 17 last year, she said.
"We thought that if we can enhance the experience on a personal level, we'll all better understand what Memorial Day means to us," Schmidt said of plans for the event at Evergreen Cemetery. "We're not saying no to Memorial Day, we're saying this is Memorial Day."
The city remains a sponsor of Memorial Day activities.
"By including the procession into the ceremony at Evergreen, I believe we will provide for a more enthusiastic acknowledgment of our fallen heroes while maintaining a solemn reflection," Mayor Virg Bernero said in a statement.
The noon procession is scheduled for May 24 and will be followed by the ceremony, which this year has the theme "Always Remember Never Forget." The keynote speaker will be Larry Meyer, a retired naval officer who chairs the Lansing Community College Board of Trustees.