Several prominent members of Germany's Jewish community and politicians took part in the demonstrations, which began with a public Sabbath in the Dresden synagogue.
Police called in reinforcements and threw a security ring around the eastern German city and set up checkpoints on highways leading into it as some 4,500 members of a far-right group assembled downtown.
Several thousand neo-Nazis had registered for the march. Earlier on Friday, some 1,000 neo-Nazis held a torch-lit rally in the city.
“Right-wing extremists have no right to be on Dresden's streets,” Wolfgang Tiefensee, federal transport minister and commissioner for eastern Germany, said during the demonstrations. He urged people not to remember the bombing raids silently “behind curtains” but to actively participate in the anti-neo-Nazi demonstrations.
The British and American air raids on the city once known as “Florence on the Elbe” are widely considered to have been unnecessary and responsible for the deaths of innocent civilians. An estimated 25,000 people are believed to have been killed in the bombings. The city has rebuilt much of its historic centre and long since moved on, but the bombing continues to stoke controversy.
Far-right groups have for years used the anniversary of the Allied Dresden bombings for propaganda purposes. Members of Germany's far-right NPD party in the Saxon parliament have scandalized the city by referring to it as the “Bombing Holocaust.”