About 530,000 people turned out, according to protest organizers, while police said they had counted 200,000 part way through the rally that lasted a little more than five hours.
"Only democracy can save Hong Kong," said 65-year-old Cheuk Kuang, a former driver. "The communist government is intervening too much in Hong Kong and it's trying to shut down all opposition voices."
The march came on the seventh anniversary of the former British colony's handover to Chinese sovereignty and a year after a protest by a half million people stunned China's leaders and forced Hong Kong's government to withdraw an anti-subversion bill that many had viewed as a threat to freedoms.
Marchers filled all four lanes of a major downtown thoroughfare, peacefully chanting slogans, holding up signs and waving inflatable dolls of their unpopular leader, Chief Executive Tung Chee-hwa, as they made their way to the fenced-off Hong Kong government headquarters.
Tempers have flared here sincethat ordinary citizens cannot elect the successor to Tung in 2007 or all lawmakers in 2008.
"We don't want to be subservient to the central government," said Ben Kwok, a 40-year-old factory owner. "We don't want Hong Kong to become like the mainland, where even the news gets censored."
Many accuse Tung of being a puppet to Beijing.
"The Hong Kong government is just foolish," said clerk Maggie Yung. "It's completely turned a blind eye to the people."
But the mood seemed less angry than last year. Thousands of the protesters were fanning themselves on the hottest day of the year, with temperatures hitting 94 degrees Fahrenheit. Police said 42 people were hospitalized for heat exhaustion or other problems.
Despite Beijing's ruling in April that shattered hopes for universal suffrage in the near future, many of the demonstrators from all walks of life vowed to keep pushing for reform.
"Someone said there's no point in protesting," said 44-year-old Lo Keung-wah, who sells construction materials. "But is it any good if we don't protest?"
The U.S. said it respected the people's right to seek political reforms.
"It is up to the Hong Kong people and the government of Hong Kong to determine the pace and scope of democratization," U.S. Consulate General spokeswoman Susan N. Stevenson said by telephone.
Chinese Foreign Ministry spokeswoman Zhang Qiyue said in Beijing that her government is "resolutely opposed to foreign interference" and added that Hong Kong's political system gives its citizens "real and unprecedented democracy."
Tung and other dignitaries stood at attention in the morning as the Chinese and Hong Kong flags were solemnly raised to the sounds of the national anthem. Outside, a dozen activists tried to carry a mock black coffin toward the ceremony but were held back by a larger group of police.
Protesters have rankled Beijing with what it views as a provocative rallying cry: "Return power to the people."
In Hong Kong, a mainland visitor, 30-year-old accountant Bob Zhuang, watched the early morning demonstration for a few minutes and called the activists "stupid."
"Should such a protest really be allowed in this territory?" Zhuang asked, waving a red Chinese flag.
Pro-democracy figures hope Thursday's march will generate momentum for September legislative elections that will let ordinary citizens choose 30 of the territory's 60 lawmakers, up from 24 four years ago.
The rest are chosen by special interest groups, such as businessmen, doctors and lawyers, who tend to side with Beijing. The central and territorial governments worry they may end up with a legislature that won't back Tung, something that hasn't happened in the seven years since Britain returned this former colony to China.
Tung was chosen by an 800-member committee loyal to Beijing.
The central government permits no political dissent in the mainland and was clearly worried about the rally.
By Dirk Beveridge