The plaque commemorates events 40 years ago
Bertrand Delanoe unveiled the memorial near Saint Michel bridge, where at least 30 of the victims are believed to have been thrown into the River Seine, French La Chaine Info television reported.
The plaque reads: "In memory of the numerous Algerians killed during the bloody suppression of the peaceful demonstration on 17 October 1961."
The centre and right-wing opposition on Paris City Council boycotted the ceremony, saying that reviving the issue could cause unrest between the various communities in France, while police unions have also protested about it.
Call for unity
But the socialist mayor said after the ceremony: "There are parts of Paris's history which are painful, but which have to be talked about and which have to be accompanied by acts."
He added that the event was not aimed against anyone, especially not the police.
"It is an act which I wanted to carry out soberly, but clearly and in a spirit of unity and fraternity and the time that we are living through is a time for unity," he said.
The far-right National Front described the plaque as "particularly obnoxious at this time of terrorist threats".
Up to 30,000 people attended the 1961 protest, organised by the Algerian National Liberation Front, against a curfew on Algerians in the city. The curfew had been introduced by Paris's prefect of police at the time, Maurice Papon.
Official figures say three people died, but historians put the figure at between 32 and 200.
Demonstrators were rounded up by the police and beaten in metro stations, while others were shot or drowned in the river, but the incidents went virtually unreported at the time.
"Massacre cover up"
Historian and member of the Human Rights League Gilles Manseron said: "A massacre of this size was able to take place in the centre of Paris and was then covered up using a certain number of means, which the state must be able to shed light on."
The National Liberation Front's armed wing was fighting for Algerian independence from France, and the television said around 30 French policemen had been killed in attacks.
One retired officer, Pierre Francois, told the television: "In a way it was that which led to what happened."
Deputies walk out
After the unveiling, some centre and right-wing deputies walked out of the National Assembly in protest, after the war veterans minister replied to a question by saying the curfew was applied on the basis of physical appearance.
The unveiling follows other recent moves in France to look again at the Algerian civil war.
A general is facing trial after admitting he tortured Algerian prisoners, and last month the country officially commemorated the Harkis - Algerians who fought on the French side, thousands of whom were killed after Algeria became independent.