"The plan would put an end to democracy once and for all," protest organiser Lajos Bokros told the crowd in front of the Hungarian parliament, estimated by an AFP reporter at around 800 strong.
According to a draft leaked to the media last week, the government wants to amend the constitution by creating a new category of emergency -- "terror threat situation" -- that if declared would enable it to issue decrees, suspend certain laws, and modify others.
Among some 30 proposed changes are controls on the internet, deployment of the army domestically, closing of borders, and the imposition of curfews in areas affected by a terrorist threat.
Critics including several opposition parties and rights groups say a vaguely defined "terror threat" could allow the government to clamp down on civil liberties.
"It's happened in our history before, and we're afraid it will happen again, that at any given time the government can allow itself to restrict our rights," said Gyorgy Magyar, a lawyer who spoke at the rally.
The proposals will be debated in parliament next month, according to Gergely Gulyas, a lawmaker with Prime Minister Viktor Orban's ruling rightwing Fidesz party.
In a newspaper interview last week Gulyas said talks with opposition parties are ongoing and dismissed accusations that Fidesz wants to seize "full powers".
"The government's duty is to protect citizens from terrorism," he said.
Since coming to power in 2010 Orban's government has often been accused of dismantling democratic checks and balances.
After losing a parliamentary supermajority last February however it needs the support of at least some opposition lawmakers to pass constitutional amendments.
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