The march by about 1,800 people began peacefully but escalated when a group of white-clad demonstrators seized a policeman's motorcycle.
Mounted police moved in to help their colleague, and demonstrators made a rush for the main police barricades near the summit venue, where finance ministers and central bank chiefs from the G20 were meeting.
As they marched on the barricades, demonstrators chanted "This street's our street" and "One two three four, we don't want your racist war" - a reference to the Iraq conflict.
Police used batons to repel waves of youths - wearing white boiler suits and masks - from barriers surrounding the Grand Hyatt hotel where the summit was under way.
Demonstrators hurled a smoke canister at mounted police near the summit venue at the heavily-fortified Grand Hyatt hotel and attempted to scale the barricades before being pushed back by a line of baton-wielding foot officers.
About 100 of the estimated 3,000 protesters who marched - at first peacefully - turned violent, witnesses said.
Several arrests were made and several police were injured in the running clashes, a police spokeswoman said, one officer suffering a suspected broken wrist.
At one point, protesters climbed up the awning of a building near the protest, unravelled a fire hose and drenched police officers standing below to the cheers of the crowd.
Australian Treasurer Peter Costello, who was chairing the G20 meeting, condemned the violence as an attempt to "trash" Australia's reputation, and said: "We won't stand for that."
Rock star and poverty activist Bono urged the G20 to focus on improving the lives of the world's poorest when he appeared at a Make Poverty History concert on Friday night.
The U2 frontman and fellow band member The Edge teamed up with Pearl Jam to perform before a 14,000 audience at the open-air concert.
Bono told fans: "Politicians all have to do what you tell them to do. Scream it from the mountains."
The summit will finish on Sunday, with police saying they are ready to deal with any further protests on the final day.
The G20 includes the wealthy G7 nations - the US, Germany, Japan, France, Italy, Britain and Canada - as well as the European Union, Argentina, Australia, Brazil, China, India, Indonesia, Mexico, Russia, Saudi Arabia, South Africa, South Korea and Turkey.
Senior IMF and World Bank officials are also attending the G20 meeting.