Sheikh Hasina's rival, former Prime Minister Khaleda Zia, was expected to address the rally in Dhaka yesterday in defiance of a government ban on large political gatherings.
Authorities have detained hundreds of people in a crackdown ahead of next weekend's elections, according to reports.
Security officials surrounded Ms Zia's home in Dhaka's upmarket Gulshan area, where most foreign embassies are located, and parked sand-laden trucks in an apparent bit to stop Ms Zia from leaving her home. Police denied that the measures were taken to stop her from joining the rally.
Ms Zia attempted to come out of her home, but police built a barricade that prevented her from getting to her car. TV video showed her condemning the government, saying, "Stop this."
Meanwhile, thousands of security forces, mainly police, tried to prevent the activists from rallying.
A 21-year-old student was killed in Dhaka's Malibagh area when security officials fired rubber bullets, said a police spokesman. Witnesses said the violence broke out after a group of activists from the opposition Jamaat-e-Islami party began marching in the streets.
Stick-wielding ruling party supporters chased stone-throwing opposition activists on the premises of the Supreme Court. Dozens of people were injured, according to witnesses.
Local media reported that more than 650 people have been detained since Friday as part of a nationwide crackdown ahead of the elections on January 5, which the opposition is boycotting.