Tens of thousands of people have headed for the provincial capital, Banda Aceh, for the two-day rally.
A spokesman for President Abdurrahman Wahid has accused security forces of ignoring orders from their commanders to exercise restraint.
Security forces say they were only defending themselves from attack.
But independent sources say that they had blockaded it to prevent people attending the rally and were also shooting at the tyres of vehicles transporting people in from outlying districts.
No shooting
The demonstration is being held on the first anniversary of last year's mass rally in Banda Aceh which was attended by hundreds of thousands of people.
But this time far fewer are expected because of the alleged blockade, prompting organisers to call for gatherings all across the province.
President Wahid called on security forces not to use violence to prevent people attending, adding it could destroy the truce between the government and the separatist 'Free Aceh' movement called in June.
"I'm in charge of the military and police," he said. "Do they think I'm afraid to fire them?"
Independence campaign
Last year's rally marked the high point of the campaign for the people of Aceh to be given the right to vote on whether they should remain part of Indonesia or become an independent state.
But that momentum was soon lost, partly because the new democratically elected government was promising wide-ranging autonomy for Aceh and other provinces with strong separatist movements.
In theory this would resolve one of the main grievances, with the government allowing Aceh to take most of the revenue from its oil and gas fields.
Violence
Ordinary people also seem to be increasingly tired of the cycle of violence, as the security forces and separatist rebels of the 'Free Aceh' movement continue to fight each other and commit atrocities against civilians.
The violence which started in the 1970s has left thousands dead.
Earlier this year there appeared to be a breakthrough when the government and rebels negotiated a ceasefire which came into force in June.
But it is now becoming increasingly clear it is having almost no effect.
The violence has been getting steadily worse and there's still no sign from the government of the long promised special autonomy.
The rally this Friday and Saturday will be a clear test of just how far the mood has swung back in favour of a referendum on independence.