The crowd waved Australian and Lebanese flags and carried coffins and placards saying "No War" as they made their way through central Sydney, escorted by about 400 police.
A former Guantanamo Bay detainee, Mamdouh Habib, and the Australian Muslim community's spiritual leader, Sheik Taj Aldin Alhilali, joined the demonstration, which police said was conducted peacefully.
A Lebanese-Australian woman, who gave her name only as Diana, told Australian Associated Press that she feared for her family in Lebanon.
"They are murdering children and burying them under rubble," she said.
"Something has to be done about this. I've got my mum and dad in Lebanon, my grandfather up in the mountains and my brother and his family were lucky to escape."
Elsewhere, Alexander Downer, the foreign minister, said the government was arranging chartered flights home for citizens evacuated from Lebanon to Cyprus and Turkey.
Up to 6,000 Australian citizens are scheduled to be ferried to safety on chartered boats by Sunday evening.
The march passed off peacefully
Downer said evacuees who normally lived in Australia would be flown home from Cyprus or Turkey free of charge, but those who normally reside in Lebanon would have to reimburse the government after their arrival.
More than 160,000 Australians claim Lebanese ancestry, making them one of the largest ethnic groups after Britons, Italians and Greeks. There are also about 25,000 dual Lebanese-Australian nationals living in Lebanon.
John Howard, the prime minister, has described the evacuation as "the largest movement of Australians overseas ever in our history".