Paraguay has a long history of corrupt politics, and Fernando Lugo, a leading opposition candidate and a former Roman Catholic bishop, endorsed the protest but did not participate in the rally.
Castiglioni accused the government of tampering with polling station documents in 11 of the country's 17 provinces.
He said: "They can falsify the voting documents but when we govern, things are going to change."
While he spoke, a small aircraft flying overhead dumped pro-Ovelar pamphlets, riling the protesters who were shouting, "Stop the fraud!"
Ovelar was shown edging out Castiglioni in preliminary results and throughout much of the recount, but Castiglioni insists he won the contest.
Final results from the centre-right Colorado Party's primaries are due to be announced on Monday, after a month of recounts and delays.
"I am the candidate that received the most votes in the history of the Colorado Party's primaries ... our victory is irreversible," Ovelar said in a recorded message, aired on television on Friday.
Ovelar, 50, a former education minister, would become the country's first female president if she won the party's nomination and the presidential election. She is backed by Nicanor Duarte, the president.
Castiglioni served under Duarte but resigned to launch his candidacy, without the latter's support.
"I can't help but feel sad tonight when I see the person who was my running mate ... now talking about conspiracies," Duarte said.
Other presidential candidates include Lugo, Lino Oviedo, a retired army general, and Pedro Fadul, a business man.