The peaceful march, called by the Shia-led opposition on Friday, follows unsuccessful talks with the government on constitutional reforms to give greater powers to parliament's elected assembly, which is on an equal footing with a state-appointed chamber.
Organisers estimated the crowd at 80,000.
Bahrain, the Gulf's banking hub and home to the US Navy's Fifth Fleet, has introduced some reforms, but the opposition, led by the country's majority Shia Muslims, wants more rights in the small Sunni-ruled island state.
Interior Minister Shaikh Rashid bin Abd Allah Al Khalifa called for legal action against organisers for holding the march without permission, the state news agency Bna said.
Rashid said his ministry did not issue the permit because of regional "tension and security threats". He did not elaborate.
"This gathering is demanding a constitution that is agreed upon by everybody, to bring the country out of a crisis which
cripples its progress and reforms," Shaikh Ali Salman, a cleric who leads an opposition group, told marchers.
"Bahrain is suffering from policies that harm the nation - corruption, unemployment and poverty. There is an urgent need for reforms," he said.
Washington has called for reforms in the Arab world since ousting Iraq's Saddam Hussein in a US-led invasion in 2003.
Many Bahrainis fear rising tension between government and opposition could cost them freedoms they have been granted since King Hamad bin Isa Al Khalifa came to power in 1999.