There have been violent clashes between police and far-right protesters on the streets of Budapest.
The trouble began when nationalist leader Gyorgy Budahazy, who has been wanted by the police since disturbances began last September, was detained.
Police decided to clear the city centre using tear gas and water cannon as the crowd of demonstrators swelled.
Earlier thousands of supporters of the main opposition party held a peaceful mass rally to mark National Day.
There has been tight security, amid fears of a repetition of last October's clashes that marred the 50th anniversary of the anti-Soviet uprising.
The unrest followed Prime Minister Ferenc Gyurcsany's admission that he had lied during the electoral campaign about the state of Hungary's finances.
The far-right rally began peacefully, with speeches from, among others, British historian David Irving, who was imprisoned until recently in Austria for Holocaust denial.
The rioting began in the early evening after police identified and arrested Mr Budahazy, who is wanted in connection with the siege of a public TV station during last September's disturbances.
As the crowd grew to around 1,000, people converged on the centre of the city, with some clearly looking for a fight with police, others just curious, correspondents say.
There were no immediate reports of serious injuries, although eyewitnesses mentioned that some demonstrators had attacked journalists.
Police drove down the city's main boulevard firing water cannon and tear gas canisters in an attempt to break up the protest, which they consider illegal.
Protesters responded by throwing bottles and stones, and built and set fire to barricades to obstruct the police.
At official ceremonies for the holiday, which marks Hungary's brief independence from Habsburg rule in 1848, Mr Gyurcsany was booed by a few hundred protesters, who shouted "Go, Gyurcsany, go!"
Later, Budapest Mayor Gabor Demszky, an ally of Mr Gyurcsany, had to be protected with an umbrella against eggs thrown by protesters during his speech.
The main conservative opposition party, Fidesz, held its own rally on Thursday afternoon, attended by tens of thousands of supporters.
Fidesz made it clear it had nothing to do with the far-right protesters.
Organisers asked participants at the Fidesz rally to carry only the official flag and not the traditional Hungarian Arpad flag, a modified version of which was used by the pro-Nazi government of 1944-1945.
Yet some participants still carried the Arpad flag and sang songs lamenting the demise of Greater Hungary after World War I.
Fidesz has been accused in the past of not dissociating itself from far-right elements. The party is in the main centre-right group in the European Union - the European Popular Party - and has vehemently denied that it harbours xenophobic or anti-Semitic views.