Around 1,500 people swarmed into Ulan Bator's central square on Thursday to oppose a political power struggle in which half the cabinet, all from the majority Mongolian People's Revolutionary Party (MPRP), have resigned.
The move by the MPRP, which ruled the mineral-rich country for much of the 20th century as a Soviet satellite, threatens to end the government of Tsakhiagiin Elbegdorj, the prime minister who belongs to the rival Democrats party.
The demonstrators, some wearing traditional gowns, others driving trucks with blaring megaphones on their roofs, surrounded the MPRP headquarters and demanded that Elbegdorj's administration stay in power.
Gerlee, a 78-year-old former MPRP supporter who has abandoned the party said: "I'm protesting to oppose this political mafia. This decision to dissolve the government does not help the people, it goes totally against us."
Mongolia's parliament, the Great Hural, is expected to decide the government's fate in a vote later in the day.
Nergui, the speaker of parliament, said in a statement: "The parliament standing committee has decided that the government should be dissolved and that the issue will be debated in the general session today."
The crisis erupted over complaints that economic growth has been slow since Elbegdorj was elected in 2004, but some have suggested that the MPRP move is linked to inquiries into government corruption.
Power shifts and political upheaval are not new in Mongolia. Four governments were formed in four years the last time the Democrats were in power, between 1996 and 2000.
The MPRP, which holds half the parliament's 76 seats, has said it wants to form a new government in co-operation with other parties. It will need a majority of support in the Great Hural to do so.
Tjalling Halbertsma, a former consultant to the MPRP, said the MPRP feels that it has enough support to form a government.
"I don't think the MPRP would have pulled the plug, so to speak, without having that in place and I think it's more a matter of when are they able to form a new government."
Mongolian television reports said that the Democrats and a few smaller parties had vowed not to participate in an MPRP-led government.
Mongolia, a vast landlocked country between Russia and China, half of whose population are nomads, has been one of the most stable countries in Central Asia since emerging from decades of Soviet influence and holding its first free elections in 1990.