"A cigarette is part of cafe culture," said Wiel Maessen, secretary of the Save the Small Cafe Owners' group which organised the rally.
"The cafes (in the Netherlands) are really struggling. Soon we will find ourselves having to ask for social welfare," added Marina Bosma from the western city of Leiden in a speech.
Protesters brandished banners denouncing the "dictatorship" of Dutch Health Minister Ab Klink.
The cafe owners want the ban, which came into force on July 1, scrapped arguing they have neither the space nor the money to build specially-ventilated smoking areas.
"In my cafe, I get through two kegs of beer and three crates of cold drinks a week. That's just about enough to pay the rent and the gas bill. I can't deprive myself of customers that smoke," said Aldith Hunkar, another cafe owner.
Some opposition lawmakers have lent their support to the cafe owners' complaints.
Extreme-right politicians have criticised the absence of any financial compensation for implementing the new regulations while liberals say the government is distorting the competition between large cafes who can install a smoking area and the small ones who cannot.
For the past few weeks, many cafe owners have decided to deliberately break the law and put the ashtrays back on their tables. Some pool money to pay the fines of fellow cafe owners.
Klink recently called on prosecutors to do more and step up their pursuit of cafe owners in breach of the law.
Those who continue to flout the smoking ban faces fines of up to 18,500 euros (23,000 dollars) or even temporary closure.