The march was organised by the far-right FPÖ party, and many participants ignored government regulations on mask wearing and the respect for minimum distances from each other.
Neo-nazi militants and thugs were reportedly among the crowd, which refused to disband and blocked traffic as it began to march towards the national parliament.
Police then intervened and detained some protestors.
It was the first time that the FPÖ, and member Herbert Kickl who is a former interior minister, officially called for a protest against the third Austrian lockdown.
“We are seeing unprecedented censure,” Kickl told media Saturday, before the party put in a second request for a rally permit which was also refused.
The reason for the refusal was given as a risk of increased transmission rates of new variants, and a “lack of contact traceability” among those who were to take part in the march.
Austrian schools, sports clubs, hotels, restaurants, cultural venues and many stores have been shut to stem the spread of Covid-19, but the country's iconic ski resorts have been allowed to remain open.