McGregor took to the streets of the Windy City, walking alongside the mayor of Chicago, Rahm Emanuel – a one-time chief of staff for former US President Barack Obama.
Mr Varadkar and rural development minister Michael Ring also took part but the Taoiseach was not walking directly beside the Dublin-born fighter.
Mr McGregor hit the headlines last week and faces up to 15 years in prison in the US after allegedly smashing a fan’s phone in Miami.
He previously avoided a criminal record after he pleaded guilty to disorderly conduct at a UFC event in New York last year.
Mr Varadkar said he wasn’t aware Mr McGregor would be there and said:
“I imagine the parade organisers invited him, but that’s it really.”
He said he didn’t have any discussion with Mr McGregor.
Mr Varadkar was asked if it was appropriate that Mr McGregor was representing Ireland given his conviction for disordely conduct.
He replied: “I think that is up to the organisers of the parade to decide who they want to march in the parade”.
The Taoiseach added: “I don’t think he was representing the country, that’s kind of what I was doing and Mr Ring.”
The massive Chicago parade lasts three hours and features marching pipe bands and Irish dancers.
A highlight of the day is the Chicago River being dyed green.
During the week police in Miami charged Mr McGregor with “strong-arm robbery and criminal mischief” after the alleged incident outside the Fontainebleau Hotel on Monday night.
According to the police report, the incident occurred while McGregor and the complainant were exiting the hotel and the fan tried to take a photo with him.
Strong-armed robbery, a theft involving violence, is a second-degree felony in the state of Miami.
Conviction of the charge can lead to a heavy fine and a prison sentence not exceeding 15 years.
The sentence depends on criminal history, especially history of violence, the value of what was stolen and whether the victim was injured.
McGregor’s lawyer said the Dublin man was giving his full co-operation in the case.
“I believe at the end of the day that we will successfully defend this case,” Sam Rabin told ‘Newstalk Breakfast’.
“I can’t tell you what the outcome will be, but I certainly don’t see him going to jail over something like this.”
McGregor thanked his fans on social media for their support. “Patience in this world is a virtue I continue to work on,” he wrote.
McGregor previously avoided a criminal record after he pleaded guilty to disorderly conduct at a UFC event in New York last year.
Several people were hurt when he hurled a trolley at a bus, smashing a window, as it left the Barclays Centre in Brooklyn in April.
Fighters Michael Chiesa and Ray Borg were injured by shattered glass and unable to compete. McGregor avoided jail after he agreed to undertake community service.
He also had to undertake anger management courses and pledged to keep the peace for a year. The case was before court in July 2018.