There are no official reports of the turnout yet, but some early estimates suggest around 4000 supporters marched from the Meadows in the capital amid a sea of saltire and lion rampant flags.
Lothian and Borders later said an estimated 5,000 attended the march and rally. Leading figures in the event claimed the total was around 10,000.
Delegations were reported from Brittany, the Basque region, Venice, and Italy.
In a minor scuffle during the march, kilted supporters grabbed Union flags from a small group taking part in a pro-union demonstration. Two people were arrested for minor disorder offences, police said.
At the rally, First Minister Alex Salmond announced that the SNP have already gathered over 100,000 signatures for the Yes Declaration, which was published when the Yes Scotland campaign was launched in May.
Over the summer, SNP members have collected the signatures via leaflets and postcards and street stalls the length and breadth of the country. The party sees it as a major milestone and contribution towards the objective of signing up a million supporters in Scotland for the Yes Declaration by the time of the referendum in autumn 2014.
Addressing the rally, Mr Salmond said: “We know that the most popular option for Scotland’s future is for the Scottish Parliament to make all the decisions, instead of leaving vital powers over the economy, social welfare and pensions in the hands of the Tories at Westminster – where they are presiding over economic stagnation, and making some of the most vulnerable members of society pay the price with cruel cuts.
“The challenge and the opportunity is clear – to translate this desire for democratic control in Scotland into a majority vote for independence in the autumn 2014 referendum.
“The momentum lies with the cause of independence and equality for Scotland. In devolved areas such as health and education, Scotland already has the powers to decide an independent policy from Westminster.
“As a result, Scotland has led the way in the UK by introducing the smoking ban, we passed world-leading climate change legislation, we reintroduced free higher education in Scotland and have a record number of Scottish students at Scottish universities for the coming year, we have delivered 1,000 additional police officers, and our National Health Service is being protected and promoted.
“In all these areas, Scotland is governed incomparably better compared to the position south of the Border. The record of the last 13 years is that self-government is good for Scotland – and the lesson is clear.
“The only way to ensure that Scotland is governed well in all areas is by completing our home rule journey and voting Yes to independence in autumn 2014.”
Lawyer Aamer Anwar, one of the speakers, said: "I've spent most of my life believing in the union and I no longer do. I don't want to be dictated to by Westminster.
"I want a future for my children - a future which isn't one predicated by austerity for decades and decades. I think the people of Scotland can govern themselves."
Scotland's only Independent MSP Margo MacDonald told the rally: "If a third of Scots believe in independence and want independence now, every one of us has got two years to persuade another Scot, and then we're home and dry. That's not fanciful, that's just practical."
SNP deputy leader Nicola Sturgeon watched the rally from the wings. She said: "The atmosphere is tremendous - positive and uplifting. It's all about Scotland's potential."
But the turnout did not impress Labour or the Scottish Conservatives.
Labour's Patricia Ferguson said: "More than three times this number turned out to march for devolution in the 90s and despite the huge drive by the SNP to get people to attend, this has been both a damp squib and a personal embarrassment for Alex Salmond.
"Scotland did not march with Alex Salmond, but they did turn out for Team GB, Andy Murray and the Olympic torch. Scots booed the First Minister in Glasgow and today Scotland has again snubbed his ambition to break up Britain.
"Scots want our First Minister to campaign for jobs, growth and economic recovery. We don't want him to focus on his constitutional obsession. It is time Alex Salmond focused on the real priorities for Scotland."
Tory constitutional spokesman David McLetchie said: "Last week, one and a half million people in Catalonia demonstrated for independence.
"Today, in stark contrast, Alex Salmond's march for separation attracted less people than a struggling third division football team. That says it all about the real demand for separation amongst the Scottish electorate."
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