Its Communications and Information Technology Commission (CITC) said the action would be "offensive" to some societies and cultures.
The authority has filed an official objection to the move with Icann - the organisation overseeing the rollout of hundreds of new generic top-level domains (gTLD).
The Saudis also opposed other names.
Icann (Internet Corporation for Assigned Names and Numbers) revealed in June that it had received 1,930 requests for gTLD "strings" which could be used as an alternative to .com, .org or other current options.
Four different organisations are competing to run the . gay address system.
But before a decision is made, third-parties are given a chance to oppose the string's creation.
Icann's records show Saudi Arabia's CITC has done so.
"Many societies and cultures consider homosexuality to be contrary to their culture, morality or religion," its submission said.
"The creation of a gTLD string which promotes homosexuality will be offensive to these societies and cultures. We respectfully request that Icann refuse the application for this gTLD."
The news dismayed UK-based campaigners.