Unions and student groups said three million people took part in rallies on Tuesday, including 700,000 in central Paris, where police used teargas against hundreds of youths who threw bottles and Molotov cocktails.
One union official said demonstrations against the CPE First Job Contract were among the biggest since the Fifth Republic was founded in 1958.
The interior ministry put the national turnout at 1,055,000, twice that of a day of action a week ago.
Union and student leaders say the CPE, introduced by Dominique de Villepin, the prime minister, will create a generation of "throwaway workers" by making it easier to dismiss employees under 26 during a two-year trial period. De Villepin hopes it will reduce youth unemployment running at almost 23%.
Gregoire de Oliviera, a 21-year-old student protesting in Paris, said: "We're demanding the complete withdrawal of the CPE. You can't treat people like slaves. Giving all the power to the bosses is going too far."
De Villepin has stood firm over the plan, but the strong turnout increased pressure on him to amend or withdraw the measure. Calls for his resignation grew. He made a new call for talks with unions, but they were rejected.
The Eiffel Tower was closed during the protests and commuters faced delays on public transport and airports were disrupted.
A protester is soaked by police
using a water cannon
Laura Dali, an 18-year-old student in Paris, said: "The problem is we are studying just to be exploited. The government must withdraw the CPE. We will continue to protest on the streets."
Isolated skirmishes hit marches in provincial cities and Paris, where police fired paintballs to mark troublemakers and 245 people were arrested. A water cannon was later used to quell protesters throwing missiles, but the Paris clashes were smaller than after protests last week.
De Villepin, a potential candidate in next year's presidential election, faces his biggest challenge since becoming prime minister last May. Opinion polls indicate that almost two-thirds of French people oppose the CPE.
Business leaders fear that France's image will be damaged if protests continue and that investment and tourism could suffer, particularly because the crisis has erupted so soon after rioting by youths in city suburbs late last year.
A demonstrator dressed in Gallic
costume and holding a banner
Unions refused to meet de Villepin for talks on Wednesday but he renewed the invitation, offering to compromise on the length of the trial period and the terms for giving notice.
"Useful time remains, let's use it for dialogue. But there is one thing that I will not accept ... that is to remain with my arms folded given youth unemployment about which you have never spoken before," he told opposition deputies.
De Villepin also faces pressure from inside the ruling Union for a Popular Movement (UMP) headed by Nicolas Sarkozy, the interior minister, a likely rival for the 2007 presidential race.
On Tuesday, the UMP parliamentary group backed Sarkozy's proposal that the government not rush to enforce the law and so leave the door open for further negotiations.
Jacques Chirac, the president, who has backed de Villepin during the crisis, cancelled a trip to northern France planned for Thursday because of the situation, sources said.
Francois Hollande, leader of the Socialist party, warned Chirac and the government against "running the risk of confrontation with a majority of the country".