Chancellor Angela Merkel earlier cautioned Germans against falling prey to xenophobic "rabble-rousing", reacting to the nascent movement called "Patriotic Europeans Against the Islamisation of the Occident" or PEGIDA.
"The people are with us!," the group's founder Lutz Bachmann shouted at the crowd, celebrating a 50-percent rise in attendance since their last "Monday demonstration" in a series of rallies that started only in October.
"Everywhere now, in every news rag, on every senseless talkshow, they are debating, and the most important thing is: the politicians can no longer ignore us!" Bachmann told the mass of people, many waving the black-red-gold national flag.
Since the protests have rapidly grown in size and spawned smaller clones in half a dozen cities, a debate about immigration and refugees has gripped Germany, a country whose Nazi past makes expressions of xenophobia especially troubling.
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Politicians have been stunned by the emergence in the city of Dresden of the nationalists who march against what they consider a broken immigration and asylum system and who vent deep anger at the political class and mainstream media.
The influx of refugees from Syria, Iraq, Afghanistan and several African and Balkan countries has strained local governments, which have scrambled to house the newcomers in old schools, office blocks and army barracks.
One demonstrator, Michael Stuerzenberger, said he does not oppose asylum for refugees but asserted that "70 percent of people claiming political asylum here are economic refugees. We don't want to stay silent about this anymore."
While several known neo-Nazis have been spotted in the PEGIDA crowds, the rallies have been dominated not by jackbooted men with shorn heads but by disenchanted citizens who voice a string of grievances.