Police took up position in front of parliament as demonstrators gathered, and activists were told they would be arrested if they marched on the headquarters of the Mongolian People's Revolutionary Party, where last week protesters broke windows and reportedly burnt the party's flag.
But the day ended peacefully, with most of the marchers leaving the square by late afternoon as the temperature dropped further.
Mineral-rich Mongolia plunged into political crisis last week when more than half the members of its cabinet, all from the MPRP, resigned from the coalition government of Prime Minister Tsakhiagiin Elbegdorj, of the Democratic party.
The MPRP, which ran the country as a Soviet satellite for much of the 20th century and remains its strongest political party, cited a decline in economic growth and rise in inflation as reasons for its withdrawal from the government.
Elbegdorj said the MPRP may have wanted to derail his administration's probes into "deep" official corruption.
"The old revolutionaries like Lenin were at least working for the poor. But now, they (the MPRP) are working for themselves for the purpose of becoming rich," said Otgonbataar, 45, a herdsman watching the demonstrations who said he supported the protests but did not participate.
"What we need is a government that works for the poor."
Half of Mongolia's population are nomads tending camels, ponies and sheep across the wind-swept steppe between Russia and China. More than 35 percent of the country lived below the poverty line in 2004, officials have previously said.
The MPRP is seeking to lead a new government, but with half the 76 seats in the country's parliament, it is one vote short of being able to nominate a new prime minister by itself.
"The MPRP has communicated its desire to form a government of national unity and we have expressed our interest to have all political parties represented in the new government," Foreign Minister Moenkh-Orgil of the MPRP said at a briefing with heads of foreign missions in Ulan Bator.
Moenkh-Orgil said his party aimed to have a new prime minister nominated by Friday and a cabinet formed by the end of next week.
Elbegdorj has said he will not fight parliament's decision, but warned that the move could be destabilizing.