Under unseasonably blue skies, police said at one point as many as 6,000 people had joined in the demonstration at the 1.3-kilometre (nearly one mile) stretch of Wall, known as the East Side Gallery.
Building contractor Maik Uwe Hinkel, who is behind the new project, has said he is prepared to enter into dialogue with the opponents, the Berliner Zeitung newspaper reported Monday morning.
Work has now been stopped until March 18, when talks with the Berlin senate and the local district authority have been planned.
Since 1990, the outdoor gallery has been covered in brightly coloured graffiti murals, including the famous "Fraternal Kiss" depicting Soviet leader Leonid Brezhnev and his East German counterpart Erich Honecker.
The 3.6-metre high (11 feet) stretch is a tourist magnet and a must-see for history buffs retracing the dark chapter of Berlin's 28-year-long division who are otherwise hard pressed to find remnants of the Wall to photograph.
But plans for a residential development along the banks of the Spree river as well as providing access to a planned bridge require a 22-metre segment of the Wall to be dismantled.
Several hundred demonstrators turned out on Friday, when work to remove the Wall temporarily stopped mid-morning after a crane had removed a first panel.
"Money is Making the Wall Fall!" read one banner Sunday, while slogans directed at Berlin's mayor Klaus Wowereit, such as "Wowereit, the Memorial Stays!" could be heard.
Many are opposed generally to the development of housing projects on the area between the East Side Gallery and the Spree, which once marked the boundary between East and West Berlin.
"I cannot and do not want to tolerate the little that remains standing of the Berlin Wall being damaged," local Green party politician Hans-Christian Ströbele said.
"If I was (US President Barack) Obama I would say to Wowereit, 'Keep Up This Wall'," a well-known DJ, Dr Motte, founder of the techno Loveparade gathering, told the crowd, alluding to the famous challenge by former US president Ronald Reagan to the Soviet Union's Mikhail Gorbachev to "Tear down this wall!" in 1987.
Thrown up in 1961, the Wall stretched 155 kilometres (96 miles) and divided Berlin until 1989, but today only around three kilometres of it still stand.