Large numbers of police with body armour and shields backed up by armoured water cannon trucks were deployed against the chanting, mostly young crowd around Istanbul's central Taksim Square.
"I pay my own Internet bill but it's the government that decides what sites I can look at," one demonstrator, Semih, complained to AFP.
"They want to control what we do on the Internet. It's repression. But the young will not be repressed, we won't take it lying down."
"These regulations do not impose any censorship at all on the Internet.... On the contrary, they make it safer and freer," Erdogan said, denying that authorities would now have access to Internet users' personal information.
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"Never. It is out of the question that people's private data will be recorded," said Erdogan, who has been in power since 2003.
The new curbs provoked a storm of protest, with critics saying they were an attempt by Erdogan to stifle dissent and stop evidence of high-level corruption being seen online.
The timing in particular raised eyebrows because it comes as Erdogan deals with a major graft scandal that erupted in December, implicating his inner circle.
Human Rights Watch said the restrictions raise concerns that a "defensive government is seeking to increase its power to silence critics and to arbitrarily limit politically damaging material online".
European Parliament chief Martin Schulz called them a "step back in an already suffocating environment for media freedom," while Washington also expressed misgivings.