The so-called Youth House served as a popular cultural centre for anarchists, punk rockers and left-wing groups for years.
The squatters considered it free public housing, but the courts ordered them out in August 2006 after the city sold the building to a Christian congregation.
During the demolition, youths yelled obscenities at police who had cordoned off the area around the building. Others hugged and cried.
One 21-year-old resident said: "They are breaking my heart. I cannot stand it."
She refused to give her last name, saying that was the norm among the people frequenting the building.
About 30 police officers blocked youths from entering the demolition site, while dozens more watched the situation from police vans.
Those arrested in the street clashes included foreign activists from Sweden, Norway, Germany and the US, police said.
More than 200 were taken into custody, while 15 were released. Others were still awaiting court hearings.
The riots were Denmark's worst since May 18, 1993, when police fired into a crowd of rioters protesting against the outcome of an EU referendum. Ten of the protesters were wounded.