Banging drums and waving signs, the crowd chanted outside the Royal York Hotel where Citizenship and Immigration Minister Jason Kenney was receiving an honorary degree from Israel's University of Haifa.
Organizers say the rally, which began with a march through downtown Toronto, was to protest against what they call Ottawa's "racist" immigration policies.
Demonstrators could be heard chanting "Shame on Kenney!" and "No one illegal" at people going to the black-tie dinner held to honour the minister.
A large police and security presence was also at the event.
Haifa University's website says Kenney is being given the philosophy degree for his "steadfast position against anti-semitism, racism and intolerance" and solidarity with Israel.