The demonstrators chanted "Jews and Arabs don't want to hate each other" and "Israel, Palestine, two states for two peoples" as they came together amid a new upswing in violence which makes prospects for peace in the decades-old conflict look deeply gloomy.
They gathered at Tel Aviv's Rabin Square, the site where the Nobel peace laureate was gunned down by a rightwing Jewish extremist at the age of 73 on November 4, 1995.
Activist group Peace Now -- which organised the rally along with the left-wing Meretz party and others -- estimated there were some 6,000 people attending.
Another protester, who identified himself only as Zeev, 67, blamed the lack of a peace process for the current violence.
"It will further deteriorate if we think that being passive is the answer."
Dov Kredo, 60, who attended the peace rally where Rabin was killed, came from Galilee in northern Israel, and said he feels "very pessimistic" about the current situation.
"It is much easier for people to answer the call of fear and hatred," he said.
He is currently serving a life sentence.
According to the Hebrew calendar the anniversary falls now, rather than in November.
Tomorrow President Reuven Rivlin hosts a candle-lighting tribute in Rabin's memory and on Monday there will be a state memorial ceremony alongside his grave in the national cemetery on Jerusalem's Mount Herzl.
"The path that was stopped in 1995 is very much the path that needs to be taken today," Peace Now spokeswoman Anat Ben Nun told AFP.
Since the start of this month, 52 Palestinians and one Israeli Arab have died in clashes or while carrying out attacks.
Eight Israelis have died in attacks. One Israeli Jew and one Eritrean have been killed after being mistaken for attackers.
"What we see now is very much related to the path not taken since 1995," Ben Nun said, adding that tonight's protest was aimed at the policies of the incumbent right-wing government of Prime Minister Benjamin Netanyahu.
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