She recited the lines believed to be from the play Julius Caesar, as she urged the party to oppose the Republican stance on Iraq and the erosion of civil liberties under President George W Bush.
But the singer has now accepted the quotes she attributed to the 16th Century playwright during her performance in Hollywood on Sunday were written by an internet prankster.
But she said that she believed in the sentiment behind the quote.
Friend's advice
She used the quotation to introduce her performance of Irving Berlin's God Bless America.
She told the audience: "Beware the leader who bangs the drums of war in order to whip the citizenry into a patriotic fervour, for patriotism is indeed a double-edged sword.
"It both emboldens the blood, just as it narrows the mind.
"And when the drums of war have reached a fever pitch and the blood boils with hate and the mind has closed, the leader will have no need in seizing the rights of the citizenry.
"Rather, the citizenry, infused with fear and blinded with patriotism, will offer up all of their rights unto the leader, and gladly so. How do I know?
"For this is what I have done. And I am Caesar."
She was given the quotation by a friend, the singer's publicist Dick Guttman said.
Website warning
In a statement, long-term Democratic supporter Streisand said she had not realised she was misattributing the remark.
"The authorship of this is important.
"But it doesn't detract from the fact that the words themselves are powerful and true and beautifully written," she said.
The event raised about $6m for the Democratic Congressional Campaign Committee.
A truth alert has been put on the singer's website.
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