As well as surrounding parliament, protesters also laid siege to the headquarters of the main opposition parties and the homes of several politicians.
Al Jazeera's Ricardo Castillo, reporting from Managua, the Nicaraguan capital, said that as the day progressed, "more and more protesters surrounded opposition headquarters. The situation gradually became violent and the atmosphere remains tense".
The clashes are the latest stage in a growing confrontation between Ortega and the opposition majority sparked by a ruling by the country's supreme court last November clearing the way for him to seek re-election in 2011.
The opposition is now seeking to overturn Ortega's decree extending the terms of 25 top magistrates and civil servants, which they say is intended to help him secure his re-election.
They argue the decree violates the Nicaraguan constitution, and say that they have gathered the necessary 47 votes to overturn it.
|Opposition plans to return to parliament has raised fears of more violence [Reuters]
"What they are showing is their fear of the majority being in power," Eduardo Montealegre, an opposition politician, said of the protestors.
"They are scared that we say 'no' to [Ortega's] re-election."
Speaking to Al Jazeera, Montealegre said that the opposition's aim is "to stop Ortega from installing a dictatorial regime in Nicaragua".
"We want to work, we want to approve laws that benefit the population, but Ortega is not thinking about the people," he said.
Opposition leaders have insisted they will return to parliament on Thursday, despite the blockade, setting the stage for a possible showdown and raising fears of further violence.
Lucia Newman, Al Jazeera's Latin America editor, said the growing tensions in Nicaragua are part of an ongoing confrontation between the ruling Sandanista party, headed by Ortega, and both the conservative and left-wing opposition, who see him as an authoritarian leader who effectively controls Nicaragua's institutions.
"It's important to point out that many of his staunchest opponents fought alongside Ortega during the 1979 revolution, and they now accuse Ortega of betraying the ideals of the democracy they fought for," she said.
In Washington, Jose Miguel Insulza, the head of the Organisation of American States, expressed his "deep concern" over the crisis and called for calm.
He stressed the need to "resolve political differences, particularly those between state representatives, through dialogue".
Ortega led the 1979 Sandinista uprising that ousted the US-backed government of Anastasio Somoza and served as president from 1985-1990.
He was re-elected in 2006.