A crowd estimated at around 1,000 people by news agency DPA waved German flags and listened to speakers attack Chancellor Merkel and the news media over their handling of crimes committed by migrants and refugees.
"When we see everything asylum seekers get compared with old people, poor young people, Germans, it's not surprising that people explode," said Tobias, a local man in his 50s who asked not to be named in full.
The group planted itself outside a town hall-style meeting where Saxony state president and Merkel party colleague Michael Kretschmer faced a grilling of his own from angry voters, who accused him of not doing enough for the region.
Sunday and Monday evenings saw outbreaks of street violence, triggered by the arrest of one Iraqi protester and one Syrian.
The two are suspected of stabbing 35-year-old carpenter Daniel H. to death after what police called an "altercation" in which three other men were wounded less seriously.
Following the arrests, mobs launched random street attacks against people they took to be foreigners, including an Afghan, a Syrian and a Bulgarian man.
After being heavily outnumbered by thousands of neo-Nazis, football hooligans and other extremists, police called in reinforcements from other states and federal police Thursday.
"We won't tolerate hooligans and violent far-right criminals taking over the streets," said regional interior minister Roland Woller.
Police probe arrest warrant leak
German police have launched a probe into the leak to far-right groups of an arrest warrant against an Iraqi suspect in a stabbing case that triggered two days of violent anti-immigrant protests.
Interior Minister Horst Seehofer said judicial authorities should use all means at their disposal to respond to the leak of the warrant for the arrest of the 22-year-old Iraqi suspect over the fatal stabbing of a 35-year-old German man.
The death sparked violent anti-foreigner protests in the eastern city of Chemnitz.
The leak of the warrant was a highly unusual occurrence that drew sharp criticism across Germany, which has strict privacy guidelines for judicial proceedings, and raised concerns of possible links between police and anti-migrant parties.
Critics said the warrant, which contained details of the number of stab wounds, may have been leaked to further inflame anger against migrants.
The stabbing and subsequent protests have exposed deep divisions in German society over Chancellor Angela Merkel's 2015 decision to open the door to more than one million migrants, mostly Muslims fleeing Middle East conflicts.
The incident has also laid bare close links between a range of anti-migrant groups, including soccer hooligans and the Alternative for Germany (AfD) party, and their ability to quickly mobilise thousands of demonstrators.
Prosecutors on Wednesday said they had launched an investigation into the leak and had taken steps to protect two witnesses named in the document.
The deputy premier of the state, Martin Dulig, a Social Democrat, suggested in two German media interviews that the leak had likely come from police or judicial authorities. "We have a bigger problem to deal with there," he told broadcaster MDR.
A spokesman for the Dresden prosecutor's office, which is handling the investigation, said the circle of those who had access to the document was not small.
