Since Friday about 60 people, including two leaders of Hindraf who organised the protest, have been detained in a police crackdown, said N Surendran, a lawyer and Hindraf member.
Protesters were carrying roses to symbolise a peaceful demand for justice.
The Malaysian government is concerned about street protests in the run up to early general elections on March 8 and any gathering of more than four people requires a police permit.
Abdullah Ahmad Badawi, the Malaysian prime minister, is widely expected to retain power at the polls with his ruling party coalition, but with a reduced majority.
Many Indians accuse his multi-racial coalition, which is dominated by ethnic Malays, of racial discrimination.
Hinraf first announced the protest in January to press the government to release five of its leaders who have been jailed under tough internal security laws.
The men were detained without trial after more 10,000 ethnic Indians marched in the capital last November to complain about a lack of job and education opportunities.
The protesters on Saturday planned to gather outside parliament to hand a protest note and roses to Abdullah, but they were halted by police a short distance away.
"I want the five to be released," Parvathy Raman, a 30-year-old accounts executive from Kuala Lumpur, said.
"I want the government to hear our problems. Everyone knows there is discrimination, but the government denies it."
Hindraf said the red roses symbolised love and peace, while the yellow roses symbolised the group's demand for justice and the release of the jailed men.
Protesters defied police orders to disperse, but scattered when sprayed with tear gas and water laced with chemicals.