The 575 legislators, elected in the April polls, took the oath of office while hundreds of youths protested outside the House of Representatives, which has been the chosen venue for mass mobilizations called by university students, Efe news reported.
The protests were expected to grow bigger by late Tuesday.
Jakarta police spokesperson Argo Yuwono told reporters that 519 people were arrested on Monday for participating in the protests, which have resulted in the deaths of three demonstrators so far.
On Tuesday, around 25,000 soldiers and riot police officers blocked the roads around the parliament building, while President-elect Joko Widodo presided over the swearing in ceremony.
The demonstrations were triggered by a bill to immediately introduce reforms to the Penal Code, which protesters see as indirectly supporting corruption while seeking to curtail civil liberties, as it criminalises actions ranging from sex outside marriage to the circulation of information about contraceptives.
The bill contains 628 articles, criminalising sex outside marriage, the dissemination of information about contraceptives, abortion, and it toughens laws against blasphemy, adultery and the spread of communist ideology.
Activists have pointed out that the upcoming reform could jeopardize the rights of women, religious minorities and the LGBT community.
Widodo has postponed the passage of the bill until October 20, when the new parliament is set to be convened, with 65 per cent of the elected legislators being part of his ruling coalition.
This is the biggest movement organised by students in Indonesia since 1998, when student protests morphed into a movement that forced the resignation of General Suharto and led to a transition to democracy.
( With inputs from IANS )