Protesting in face masks and keeping their distance from each other under coronavirus restrictions, they gathered under the banner "No to annexation, no to occupation, yes to peace and democracy". Some waved Palestinian flags.
The protest was organised by left-wing groups and did not appear to be the start of a popular mass movement. Around half of Israelis support annexation, according to a recent opinion poll.
The organisers screened a video address by US Democratic Senator Bernie Sanders.
"It has never been more important to stand up for justice, and to fight for the future we all deserve," Sanders said. "It’s up to all of us to stand up to authoritarian leaders and to build a peaceful future for every Palestinian and every Israeli."
The Palestinians want an independent state in the West Bank, east Jerusalem and the Gaza Strip, territories Israel captured in a 1967 Middle East war.
Netanyahu has set July 1 as the date to begin advancing his plan to annex Israel's settlements and the Jordan Valley in the West Bank, hoping for a green light from Washington.
US President Donald Trump has unveiled a peace plan that includes Israel keeping its settlements and the Palestinians establishing a state under stringent conditions.
Palestinians have rejected the proposal and voiced outrage against Israel's proposed annexation.
Warning of possible violence and diplomatic repercussions, some European and Arab states, together with the United Nations, have urged Israel not to annex its settlements, regarded by many countries as illegal.