The event was organised by the Sheffield Palestine Solidarity Campaign and those gathered chanted “From the river to the sea, Palestine will be free”.
Speeches were also made from the Town Hall steps and a giant Palestine flag was laid out on the ground.
It follows another, smaller demonstration on London Road on Friday evening.
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Thousands of Palestinians have been forced to flee from their homes after a week of sustained conflict.
Since Monday night, Palestinian militant group Hamas has fired hundreds of rockets into Israel, whose military responded by barraging the Gaza Strip with tank fire and air strikes.
At least 126 people have been killed in Gaza, including 31 children and 20 women.
In Israel seven people have been killed, including a six-year-old boy and a soldier.
Five of Sheffield’s Labour MPs have written to foreign secretary Dominic Raab calling on the Government to take action in response to the continued violence.
On Saturday The Associated Press (AP) reported that an Israeli air strike destroyed a high-rise building that housed the AP, Al-Jazeera and other media in the Gaza Strip.
The AP said the air strike came roughly an hour after the Israeli military ordered people to evacuate the building.
The news agency said there was no immediate explanation as to why the building was targeted.
Diplomatic efforts to end the fighting are likely to intensify following the arrival of US envoy Hady Amr.