The pro-peace protest was the largest in Israel since it launched operation Protective Edge on July 8, an offensive that has seen at least 1,980 Palestinian deaths and 67 on the Israeli side.
It was organised by the opposition leftwing Meretz party and Peace Now, a group opposed to Jewish settlement building on occupied territory, and the communist Hadash party.
Israeli and Palestinian negotiators were to resume indirect talks yesterday with Egyptian mediators on reaching a more permanent ceasefire before a current truce expires at midnight on Monday.
"All Netanyahu's government has done is weaken Abbas and strengthen Hamas," against which the Jewish state launched its operation in a bid to end rocket fire from the Palestinian enclave which it controls, Meretz MP Nitzan Horowitz said.
Party chief Zehava Galon called on Netanyahu to resign. "He has failed, both for security and for peace -- he must go," he said.
Writer David Grossman said Israel must "make peace with the Palestinian Authority and negotiate with the Palestinian unity government".
However, Netanyahu has refused any discussion with the unity government, accusing it of having links with Hamas, which Israel brands a terrorist organisation.
Police were deployed in force yesterday night in Tel Aviv's Yitzhak Rabin Square to prevent trouble with counter-demonstrators from the far right.
On Thursday, the same venue hosted a demonstration by around 10,000 Israelis, supportive of the military operation, urging the government and the army to end rocket attacks from Gaza once and for all.
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