Police formed several cordons at the Moscow rally to disperse the crowd, detaining protesters who resisted.
In March, Navalny, whose Fund for Combating Corruption (FBK) specializes in producing investigations into the supposed ill-gotten gains of senior officials, released a video report detailing how Medvedev has allegedly acquired mansions, vineyards and a yacht worth hundreds of hundreds of millions of dollars.
Other police sources said that the protests on Tverskaya would be tolerated as long as protesters did not carry placards or shout slogans.
If Russia Day is widely misunderstood, this particular version had a theme: Russians continue to protest against corruption, and for Russia. The demonstrators are demanding an end to corruption they say is endemic among government officials.
The demonstrators appeared predominantly young - those who were born or grew up during Mr Putin's 17 years in power.
President Vladimir Putin's approval ratings remain high going into elections in March 2018, but two years of recession have deepened public discontent.
Navalny, the founder of the Anti-Corruption Foundation and chairman of Russia's opposition Progress Party, tweeted earlier on Monday that they will "peacefully" gather at Tverskaya Street. Navalny's arrest comes during a series of arrests conducted by Russian law enforcement against the president's opponents.
Financial corruption by the Russian government "is costing the future of our young people", one protester told the AP. Police arrested 1,500 people nationwide, including more than 1,000 in Moscow, and a handful are being prosecuted for attacking police.
More than 200 towns and cities were signed up for protest rallies to mark the Russia Day public holiday according to Navalny's social media. But on the eve of the demonstration, Navalny issued a video message calling for protesters to instead come to the city's main avenue, Tverskaya, a broad, four-lane thoroughfare.
The arrest did little to hamper protests, some of the biggest the country has seen in years.
On the eve of the event - which was authorized - Navalny announced the protest was changing location to Tverskaya because the authorities had blocked his efforts to set up a stage and sound equipment.
Navalny was arrested outside his home en route to the rally.
Later on Monday evening Navalny was sentenced by a Moscow court to 30 days in jail for organized an unauthorized protest rally. The watchdog group detailed initiatives to show anti-Navalny films during classes and noted Valentina Matvienko, an influential politician in Russia's upper house of parliament, last month suggested new laws barring children from participating in protests. He said interference had prevented contractors from building a stage at the agreed venue.
Navalny was jailed for 15 days in March for stirring up an estimated 60,000 people in Moscow.
A crackdown on peaceful protests across Russia in which hundreds of people were arrested and numerous others beaten by police earlier today demonstrates the Russian authorities' utter contempt for fundamental human rights, Amnesty International said.
A live internet feed run from the opposition leader's office went offline and his spokeswoman said electricity to the office was cut.
The demonstrations were a follow-up to large-scale protests that swept Russian Federation in late March. There was no immediate statement from police.
Some protesters however heeded his call to change locations.
He was arrested at the entrance of his home on Monday, his wife wrote on his Twitter account, posting a photo of him getting into a police auto. Protests unfolded Monday in more than 100 cities, even in some where they had been banned outright.
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