The rally was part of a two-week-old protest challenging the policy of moving the democratic island economically closer to China.
Protest organiser Lin Fei-fan said 500,000 people had turned out in the biggest demonstration since the movement began.
Crowds dressed in black sat on one boulevard, many carrying sunflowers, the symbol of the protest movement, and wearing yellow ribbons that read "Fight for democracy, retract the service trade pact."
Several hundred mainly student protesters have been occupying Taiwan's parliament building since March 18, supported by thousands outside the building.
They are protesting against president Ma Ying-jeou's plan for a trade deal that would let Taiwanese and Chinese service-sector companies open branches in the other's territory.
On Saturday, Mr Ma gave in to students' demands to increase scrutiny of future pacts signed with China,
But he refused to withdraw the pact in question, saying it would deeply harm Taiwan's interests.
"I'm not against free trade, but the government should come up with policies to protect the local industries before they open the door," said protester Philip Lihan, 30.
"I've been sitting-in near the legislature every day after work until midnight," he added.
The graphic designer, who works in Taipei an is originally from Chiayi in southern Taiwan. said he had been working with other artists to create murals in support of the protest.