In sweltering heat, marchers carrying banners declaring "Return power to the people" streamed out of Victoria Park on Thursday and made their way towards the central government offices.
The march began half a hour early because so many people had crammed into the park heat to take part in the demonstration.
They queued up at all available entrances to the park, which can hold only 50,000, waiting to join the sea of protesters making their way through the city centre.
Organisers predicted 300,000 people would take part in the demonstration, which was being held to protest against Beijing's decision in May to rule out universal suffrage for Hong Kong for at least the next four years.
The march was being held on a public holiday to mark the seventh anniversary of Hong Kong's return to Chinese sovereignty after 156 years of British colonial rule.
"We have to sit down and talk about the road map to universal suffrage. We have to set a date and work it out with China"
It also falls one year to the day since an anti-government demonstration held last 1 July which drew 500,000 people, Hong Kong's biggest public demonstration in modern times.
The turnout at Thursday's protest march was being seen as a key indicator of how badly Hong Kong people want to press their demands for democracy.
If the turnout was below the organisers' prediction, China was likely to take it as a sign that pro-democracy forces in the territory are weakening.
However, early estimates by organisers were that the turnout might even exceed expectations, with thousands of people still waiting to take part in the demonstration more than 90 minutes after the first marchers left the park.
Hong Kong's outspoken Catholic bishop Joseph Zen addressed a prayer meeting before the march by urging people to "show Beijing and the world" that the territory's people are committed to a peaceful resolution of the ongoing political dispute.
Publisher Jimmy Lai, who owns Hong Kong's mass-circulation Apple Daily, was among the marchers.
He said: "We have to sit down and talk about the road map to universal suffrage. We have to set a date and work it out with China."
Hong Kong's mini-constitution allows for universal suffrage in time for the 2007 election for chief executive and 2008 legislature elections, but Beijing intervened in May to say there could be no free elections until after 2008.