Anti-Nazis and far-right EDL supporters hurled missiles and attempted to break police lines as they clashed at a demonstration near an area of east London with Britain's largest Muslim population.
Flares and bottles were thrown as officers kept the 600 EDL supporters and a larger contingent of counter-demonstrators apart, enforcing a ban on supporters of the anti-Islamic group marching into the borough of Tower Hamlets and to the East London Mosque.
EDL supporters had earlier marched over Tower Bridge before being halted at Aldgate. The Guardian reports that members of similar groups from Finland, Germany and Poland swelled their ranks.
Police were seeking to prevent a repeat of the Battle of Cable Street in 1936, in which fascist blackshirts and East End locals clashed.
About 3,000 officers blocked all EDL protesters' routes to Whitechapel Road, where the mosque is located.
Police said they had arrested two people, one for possession of a bladed weapon and the other for the possession of an explosive substance, a firework.
On Friday, the EDL attempted to overturn the restrictions on the route of their march, claiming they had the right to peaceful protest against the establishment of 'Sharia law' in Tower Hamlets. However Mr Justice King ruled the police conditions "reasonable and proportionate" measures to counter public disorder.
Many counter-demonstrators gathered in Altab Ali Park, named after a Bangladeshi garment worker murdered by white racists in 1978.
In the crowd was Lutfur Rahman, mayor of Tower Hamlets.
Ahead of the protest, he was joined by local MPs and 10,000 petitioners in calls for the EDL protest to be banned altogether.
"We just want to get on with our normal lives. We are celebrating peace and tranquillity. We are not espousing violence. The people who want to talk about violence and inflict violence and hate on others can just go back to their nests and their holes," he said.
"We are a united community and we are a diverse community. Young people are not coming out today because they are frightened."
In June, EDL leaders Stephen Lennon, also known as Tommy Robinson, and Kevin Carroll were arrested for attempting to defy a police ban on entering Tower Hamlets to march past the East London Mosque and to Woolwich, where soldier Lee Rigby was murdered by Islamists in May.
In 2011, an EDL march was stopped by police at Aldgate.