The counter-demonstrations were the opposition's first major show of force on the streets of Tehran since mid-September rallies that coincided with state-backed protests against Israel.
Many marchers wore green scarves or wristbands that symbolized the campaign of opposition leader Mir Hossein Mousavi, who claims President Mahmoud Ahmadinejad stole the June election from him through fraud. Mousavi and his allies, including former President Mohammad Khatami, appeared to encourage opposition protesters to stay on the streets.
The contrasts in the latest protest wave were stark: people chanting "Death to America" outside the former embassy while opposition marchers nearby cried "Death to the Dictator."
Witnesses told The Associated Press that security forces - mainly paramilitary units from the elite Revolutionary Guard - swept through several hundred demonstrators at Haft-e-Tir Square in the city center, clubbing, kicking and slapping protesters. The witnesses spoke on condition of anonymity because of fear of reprisals from authorities.
Pro-reform Web sites said police fired into the air to try to clear the square - about half a mile from the annual anti-American gathering outside the former U.S. Embassy. The report could not immediately be independently verified.
The state-run Islamic Republic News Agency reported police also used tear gas to disperse protesters in other parts of the city.
There was no independent information on injuries or arrests, but state-run Press TV said no one was hurt.
The size of the protests were difficult to determine, but they appeared significantly smaller than the hundreds of thousands who streamed into the streets in the weeks after the disputed re-election of President Mahmoud Ahmadinejad.
Media restrictions now limit journalists to covering state media and government-approved events, such as the rally outside the former embassy. Mobile phones and Internet access were apparently blocked in a repeat of tactics used by authorities after the election.
Authorities appeared determined to avoid opposition rallies overshadowing the anniversary of the embassy takeover. They had warned protesters days in advance against attempts to disrupt or overshadow the annual gathering outside the former embassy, which was stormed by militants in 1979 in the turbulent months after the Islamic Revolution.
Fifty-two Americans were held hostage for 444 days in a crisis that began a three-decade diplomatic freeze between the two nations.
Security forces fanned out around Tehran at daybreak on Wednesday after opposition leaders refused to call off their appeals for counter demonstrations.
Volunteer militiamen linked to the Revolutionary Guard patrolled the streets on motorcycles - a familiar sight during the unrest touched off by the claims of election fraud.
The full extent of the opposition marches was not immediately clear. Hundreds were seen in Haft-e-Tir Square, some chanting "Death to the Dictator" or marching silently and flashing the V-for-victory sign.
Reformist Web sites also said one of the leading opposition figures, Mahdi Karroubi, was beaten by security forces before being led away by his bodyguards. Neither Karroubi nor his aides could be immediately contacted.
Other witnesses - also speaking on condition of anonymity - said about 2,000 students at Tehran University faced off against security forces, but there were no immediate reports of violence.
Outside the former U.S. Embassy, meanwhile, thousands of people waved anti-American banners and signs praising the Islamic Revolution.
The main speaker, hard-line lawmaker Gholam Ali Haddad Adel, denounced the United States as the main enemy of Iran. He did not mention the talks with the West, including the United States, on Iran's nuclear program.
But he labeled opposition leaders as dangerous for the country, saying they claim to support the ideals of the Islamic Revolution but aid Iran's perceived enemies.
In Washington, President Barack Obama noted the anniversary of the takeover of the U.S. Embassy and urged the two countries to move beyond the "path of sustained suspicion, mistrust and confrontation."
The hostage crisis "deeply affected the lives of courageous Americans who were unjustly held hostage, and we owe these Americans and their families our gratitude for their extraordinary service and sacrifice," Obama said in a statement.