Security forces locked down central Kabul, blocking key intersections with stacked shipping containers as the protesters marched on the presidential palace - demanding that the line linking energy-rich Central Asia pass through a central Hazara-dominated area in Afghanistan.
The demonstration highlights the war-torn nation's turbulent politics. It follows one of the biggest anti-government rallies for years last November, which was sparked by the beheading of a group of Hazaras.
"(President) Ashraf Ghani is hiding himself behind blast walls," Dawood Naji, a Hazara leader, told flag-waving demonstrators, drawing rousing applause.
"We can break down these containers if we want but we are here to protest in a civilised way for our rights."
Authorities shut down roads to the presidential palace, fearing a repeat of the violence in November when protesters tried to storm the compound.
The 500-kilovolt TUTAP power line, which would connect the Central Asian nations of Turkmenistan, Uzbekistan and Tajikistan with electricity-starved Afghanistan and Pakistan, is seen as a crucial infrastructure project.
The line was originally set to pass through the central province but the government decided to reroute it through the mountainous Salang pass north of Kabul, saying the shorter route would speed up the project and save millions of dollars.
Hazara leaders in the ethnically divisive nation lashed out at the Pashtun president, saying the decision to reroute the line was a sign of discriminatory policies - a charge that Ghani denies.
"Bamiyan has seen no development in 15 years (since the Taliban were toppled from power)," Hazara lawmaker Arif Rahmani told AFP.
The rally comes in the midst of the Taliban's annual spring offensive launched last month and authorities have warned that it could be targeted by insurgents.
"Staging peaceful protests is the civil right of every Afghan citizen," the interior ministry said in a statement.
"We respectfully request that our countrymen not allow the enemy (to) misuse this opportunity and disrupt public security.
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