Many protesters who were marching on Friday wore stickers reading, "Constitutional Reform First."
"We demand constitutional reforms now. We demand a freely elected parliament." screamed the crowd, which included several hundred women.
The rally was spearheaded by the Al-Wefaq National Islamic Society, which calls for more power for parliament's elected lower chamber. That body now shares equal powers with the royally appointed upper house.
"People are demanding immediate constitutional reforms which will guarantee more rights to the people," said Abduljalil Singace, an al-Wefaq spokesman at the rally. "This campaign for reforms will continue until the demands of the people are met," he said.
The two-hour demonstration on the first day of the weekend caused a major traffic jam on the road leading to the city's main shopping malls.
Policemen moved through the crowd in vehicles but did not interfere; a police helicopter hovered over the area. Traffic police struggled to keep the traffic moving and the rally ended peacefully.
The demonstration followed one last month in Sitra, just outside the capital, where 7000 flag-waving people marched through the streets demanding reforms.
Transition to democracy
In October 2002, Bahrain held its first democratic parliament elections since 1973 after the ruler, Hamad bin Isa Al Khalifa, won the approval of a new constitution in a vote the year before.
"People are demanding immediate constitutional reforms which will guarantee more rights"
The charter called for a parliament - which had not existed since 1975 - an independent judiciary and a body to investigate public complaints.
But al-Wefaq and three other groups boycotted the 2002 elections, in part because of their objection to the equal powers between the two houses of parliament.
Al-Wefaq enjoys strong support from Bahrain's Shia Muslims, who make up a slight majority of the kingdom's 400,000 citizens but complain they are discriminated against by the country's Sunni Muslim leadership.
During the mid-1990s, Shias staged a violent campaign for political reform, triggering a government crackdown. More than 40 people were killed in the unrest.