Maita Gomez, an activist, said: "We are outraged by the reports of corruption and greed in government."
Confetti was thrown by employees in the buildings overlooking the rally to show their support.
It was the biggest rally since 2005 when tens of thousands marched against Arroyo for allegedly cheating in elections a year previously.
The rally took place in the city's financial district of Makati, a stronghold of Arroyo's opposition.
Jejomar Binay, the mayor of Makati and a leader of the opposition, accused government forces of preventing protesters from entering the city to attend the rally.
The corruption allegations were ignited by a senate inquiry into government kickbacks in a telecom agreement.
Arroyo's husband and a former Philippine elections chief are accused of attempting to gain $130 million from a deal with a Chinese company if they cleared a national broadband contract.
|Arroyo said the accusations were typical |
of the Philippines' political culture [AFP]
The allegations have led to Arroyo cancelling the deal with the firm - ZTE Corp - worth $329 million.
Both men deny the accusations.
On Friday, Arroyo said at a briefing for investors, diplomats and industry leaders: "These types of charges have regularly emerged even in previous administrations, as part of our less than impressive political culture.
"We call on our political leaders of all parties and preferences to look to our future … to ensure stability for the sake of the nation."
Arroyo said earlier this week that she would complete her term which finishes in 2010.
Analysts said that the lack of high-profile politicians at the rally showed that her opponents did not believe she could be ousted.
A day earlier officials warned of plots to assassinate Arroyo and bomb foreign embassies, a move critics say was intended to derail Friday's demonstrations.
Renato Reyes, one of the protest organisers, decribed the allegations as a "very desperate tactic to create an atmosphere of terror" and prevent people from joining the protest.
Speaking to Al Jazeera, Ramon Casiple, executive director for the Institute for Political and Electoral Reform, said the political crisis is all about the government being the custodian of public money.
He said the Philippines' economic progress has not been felt on the ground and there is a general perception that there is large-scale corruption within the government.
ZTE Corp, a leading Chinese telecommunications company, has said that the scandal could affect bilateral trade.
Howard Xue, a ZTE spokesman, said the company "cannot allow itself to be dragged into any political circus" and dismissed a call for appearance at the Philippine senate hearing.
"ZTE has neither done anything wrong, nor has it bribed anyone to get this project," he said.
Pointing out that China had overtaken the US as the Philippines' biggest trade partner, Howard said: "This episode certainly brings unforeseeable negative influence on bilateral economic cooperation between China and Philippines."
Source: Al Jazeera and agencies