Demonstrators focused their anger on Russian President Vladimir Putin, chanting: "Putin Out."
An enormous bare-chested, muscle-flexing blow-up doll caricaturing the president flanked one side of the stage draped in a rainbow flag.
Protesters said their main concern was the law adopted by the duma in June making "propaganda of non-traditional sexual relations among minors" illegal.
Amsterdam Mayor Eberhard van der Laan told the crowd he hoped the protest would send the message to Moscow that "love is not propaganda."
He said the city was "proud of its homosexual community and they have the right to support from governments."
Amsterdam has a long history of supporting gay rights, including performing the first gay marriages in 2001.
Mr Van der Laan said he didn't know whether the message would reach Moscow, but the protest was "a matter of principle."
He called on the Dutch government to submit a complaint to the European Court of Human Rights.
The protest, entitled "To Russia With Love," was organised in response to a concert featuring a Russian state orchestra and choir that was held on the far side of the square later in the evening.
Mr Van der Laan declined to meet Mr Putin when he visited the Netherlands in March, sending lesbian councillor Carolien Gehrels in his place and flying a rainbow flag over city hall.