Perennial political candidate Ms Hanson, the leader of One Nation, told one of the 16 Reclaim Australia rallies held across Australia on Saturday that Islam was a threat to their safety.

At the same time, the smaller counter-rally chanted and held anti-Nazi banners.

"It makes me sick to look around at this crowd and think that each one of us has a potential target on our heads by extreme individuals and terrorist groups," Ms Hanson said.

"Many Muslim extremists are leaving Australia to fight for ISIL, an organisation that hates western values and democracy.

"…If those men have gone to fight Australian citizens with dual citizenship, I call on their citizenship to be revoked."

Ms Hanson, who has not been elected to office since 1996, told the crowd One Nation would contest Senate seats in every state at the next federal election.

That announcement was met by cheers by the crowd, many of whom expressed concern that sharia law would be enforced upon Australia.

Neither side covered itself in glory – chants of "Muslims are welcome, bigots are not" and "Nazi scum off our streets" were countered with chants of "Aussie Aussie Aussie, Oi Oi Oi" and "bullshit bullshit bullshit".

One of the organisers of the counter-protest, Shayne Hunter, said it was important to send a message to Muslims that the Reclaim Australia crowd was not representative of the wider community.

"We displayed that these views aren't acceptable and that there is vocal opposition to the scapegoating of Muslims and blaming Muslims for everything," he said.

"We also showed that people understand the issue of Islamic terrorism is multidimensional.

"Not all Muslims are to blame for it and there's a lot of things that Australia could do, like thinking about the war crimes in Iraq and how that leads to hatred within some minorities in the Muslim world."

The two competing rallies at times threatened to spill over into violence, but a heavy police presence ensured no major flare-ups.

There were some minor scuffles, however, requiring police intervention.

Two people were given move on directions, while one man was issued with a notice to appear in court on public nuisance charges.

Inspector David Cuskelly estimated there were about 1000 protesters in King George Square, 800 of whom were part of the Reclaim Australia rally and the remaining 200 part of the counter-rally.

"I think generally it went very well," he said.

"It's an emotive topic and our role here is to ensure people can assemble peacefully and get their point across and that's what we've done today by the way we've managed it.

"There were a couple of instances where people had to be separated and moved on, but there were no arrests made."

While Reclaim Australia organisers and most sympathisers outright rejected the "Nazi" jibes from the other group, there was evidence of some extremist infiltration.

Users of an online white supremacy forum seen by Fairfax Media urged fellow neo-Nazis to attend the rally "undercover" to "preach our message".

"So no swastikas guys. No Celtic cross. No 'Nationalist' stuff," the user wrote.

"So please skinheads. Leave you suspenders and combat boots at home. Tomorrow is a undercover OP (sic) for us."

At least one man in the Reclaim Australia rally ignored that advice and wore a Golden Dawn t-shirt, representing a neo-Nazi party that has gained prominence in Greece in recent years.

Mr Hunter said the neo-Nazi presence showed fascism was "not a thing of the past".

"They have a right to free speech, we also have a right to free speech," he said.

"We have a right to assemble here, a right to use our voice and challenge their louder, bigoted, racist and openly Nazi views.

"We have a right to come here, share that platform and share our platform."

One of the Reclaim Australia organisers, who would only provide her first name, Cheryl, said the counter-rally was "not any of my business".

"We had the legal permits, we did everything legally, so it's freedom of speech," she said.

"…We didn't invade their space, they did what they did."

Dubious symbolism was not limited to the Reclaim Australia crowd – North Korean and Soviet flags flew over the counter-rally, and many of its front line participants covered their faces with scarves or Anonymous-style Guy Fawkes masks.