The organisers say more than 3,000 people took part, in spite of a heavy security presence.
The government says the protest was illegal.
Activists from Bahrain's Shia Muslim majority have been demonstrating against the kingdom's ruling Sunni monarchy since last February.
Thursday's march in the centre of Manama was led by a prominent human rights activist, Nabeel Rajab.
"We are using the streets peacefully. We are marching for our rights," he told the BBC.
One activist tweeted: "Manama is filled with tear gas, protesters running in all directions, followed by shooting and riot police."
A government official confirmed to the BBC that the authorities had acted to disperse the march.
"Security forces warned those involved and requested them to disperse, but after they disobeyed orders the security forces took the necessary legal measures," the official said.
Excessive force
Bahrain's Shia Muslim majority has long complained of discrimination and human rights abuses at the hands of security police.
The Interior Ministry was heavily criticised in a report by an independent committee of experts released in November.
It found that the security police had used excessive force and had systematically tortured detainees while suppressing  pro-democracy protests that began in February 2011.
More than 40 people were killed during the violence.
The report, commissioned by the king, was seen as an attempt to defuse tensions between the government and the predominantly Shia protesters.
Ahead of the latest march, the government said it would rebuild 12 Shia mosques that were demolished during last year's unrest.
Security police have used tear gas and stun grenades to break up an anti-government march in Bahrain's capital, Manama.