Demonstrators gathered in west Kabul and walked through the rain bearing the coffins draped in green to the gates of the presidential palace, where organisers said they were planning to stage a sit-in until their demands were met by the government.
The number of protesters outside the palace dwindled to dozens after warning shots were fired in the air this afternoon, though many people remained in the streets, according to an AFP photographer.
The defence ministry said the armed forces had not fired.
The protest, unusual for Afghanistan in its scale and organisation, had been mostly peaceful today.
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Demonstrators also carried pictures of the victims, including two women and one child - a girl, whose coffin was carried by grieving women.
"This is a protest to demand justice for the victims who were so mercilessly murdered, we demand justice for people who are being brutally killed by terrorists everyday," protester Mohammad Hadi told AFP.
The circumstances surrounding the beheadings remain unclear. The bodies of the seven victims, who are believed to have been held hostage by unknown gunmen for months, were found on Saturday in Zabul province, where fighting between rival Taliban groups has escalated over recent days.
"The people are asking why the government has been indifferent towards these crimes, people are demanding the resignation of the heads of the government because they have been inefficient and corrupt and never address the demands of the people," Jawad Sultani, a university lecturer at the protests said.
The protest came as the United Nations followed the Afghan government and the US in condemning the killings, suggesting they may have been a war crime.
"These senseless murders may amount to war crimes and the perpetrators must be held accountable," Nicholas Haysom, the UN's Special Representative for Afghanistan, said in a statement today.