The police fired rubber bullets and teargas at Viswa Hindu Parishad (VHP) supporters attempting to break a security cordon and reach the site where the 16th century Babri mosque once stood.
Claiming religious rights over the disputed site, the VHP is demanding that a Hindu temple be built at the place.
Trouble broke out soon after a trainload of VHP activists arrived in the town. As the police began arresting them, the mob went berserk, attacking the security personnel with iron rods and stones.
The trouble subsided after about an hour with the arrest of the top VHP leader Ashok Singhal and several of his followers.
"Five rounds of rubber bullets were fired in the air," Inspector-General of police VK Rai said.
After the arrests, the activists were taken away in buses to various jails.
The rally had been banned by a court order and the police had ringed the tensed town days in advance to prevent the demonstration.
The disputed site in Ayodhya has been at the heart of rising communal strife between Hindus and Muslims in India.
The demolition of the mosque by Hindu zealots in 1992 had led to nationwide riots, killing 2000 people.
They insist the mosque was built over a razed temple, which they now want to rebuild.