Supporters of mainstream nationalist parties walked in silence behind a banner urging the armed separatist group ETA to resume the ceasefire it ended in December.
They also called on the Spanish and French governments to discuss self-determination.
Just 50 yards behind, supporters of the more radical Euskal Herritarrok - a political alliance based on ETA's political wing Herri Batasuna - demanded the release of ETA prisoners and the withdrawal of Spanish security forces from the Basque region.
ETA - whose initials stand for Basque Homeland and Freedom - has been blamed for about 800 deaths in its 30-year campaign to carve a Basque state out of northern Spain and southern France.
'Stop the violence'
Organisers of the demonstration said some 70,000 people took to the streets, divided equally between the two groups.
Basque Nationalist Party President Xabier Arzalluz said the big turnout showed that Basque people wanted the violence to end.
"We know one thing - that people do not want shooting. And secondly, that ETA must stop. Thirdly, that the Aznar government must move."
He said if Euskal Herritarrok could not accept those terms "they are not part of this demonstration, however many might come".
Euskal Herritarrok leader Arnaldo Ortegi said the demonstration was divided into "two different blocs but with major points of agreement and the odd disagreement".
"Today the important thing is to stress the points of agreement. Here we are defending our prisoners of war, defending peace and democracy for our people," he said.
Hopes of a lasting peace in the region were dealt a blow last December when ETA ended a 14-month ceasefire, blaming a lack of progress in talks with the Spanish Government.
Since then, Spanish police have foiled two attempted car bomb attacks and expect more trouble in the run-up to elections in March.