The march began in the Victoria Park later than scheduled after the police urged the leaders of the protest not to come to the parliament area following incidents earlier in the day, reports Efe news.
The authorities negotiated with the coordinator of the Civil Human Rights Front, Jimmy Shan, and allowed protesters to come to Wan Chai but not to Admiralty, where the headquarters of both the government and the legislative council are located.
Wan Chai and Admiralty metro stations, in the heart of Hong Kong, have been closed off to the public.
The protesters are demanding the complete withdrawal of the contentious extradition bill, the resignation of Hong Kong's Beijing-backed leader, Carrie Lam, and the release of all those detained in clashes with the police last month.
The demonstrators were mostly dressed in black and holding banners reading "No China extradition. Carrie Lam resignation" or "Hong Kong stand up" as well as others condemning police violence during past protests.
Lam presided over the brief official ceremony, making it her first appearance since her public apology on June 18 for the crisis unleashed following the contentious extradition bill, which now remains suspended.
Once Lam began her six-minute speech, pro-democracy legislator Helena Wong began rebuking her and asking her to resign, leading security guards to remove her from the site.
Referring to the mass protests against the extradition bill, Lam said in her speech that "after this incident, I will learn the lesson and ensure that the government's future work will be closer and more responsive to the aspirations, sentiments and opinions of the community".
"The first and most basic step to take is to change the government's style of governance to make it more open and accommodating. We also need to reform the way we listen to public views.
"I am also fully aware that while we have good intentions, we still need to be open and accommodating. While the government has to ensure administrative efficiency, it still needs to listen patiently," Lam added.
Earlier in the day, hundreds of citizens clashed with the local police, forcing the event commemorating the transfer of the sovereignty of Hong Kong to China to be held for the first time inside the Convention and Exhibition Centre instead of the Wan Chai promenade, where it was scheduled to be held.
The government said the change in venue was due to bad weather.
As people watched the ceremony through a live broadcast from inside the HKCEC, police refused access to the protesters and allegedly used force to prevent them from entering the compound.
A short distance away, in the central Admiralty area, nearly 1,000 protesters, wearing raincoats and yellow helmets, blocked a large avenue.
Police dispersed them using batons and tear gas.
On Sunday, thousands of pro-Beijing protesters rallied in support of the territory's police.
The handover on this day in 1997 marked the end of British rule in Hong Kong.
( With inputs from IANS )