Senior figures from the opposition Jobbik party, the third biggest with 43 seats in the 386-member parliament, harangued the crowd with charges that Israeli President Shimon Peres had praised Jews for buying property in Hungary.
They said the WJC had decided to hold its four-yearly gathering in Budapest to shame the Hungarian people.
Conservative Prime Minister Viktor Orban, who is due to address the WJC assembly's opening session on Sunday evening, had ordered the rally to be banned, but a court on Friday ruled police had overstepped their authority in trying to block it.
The WJC, which normally holds its worldwide assembly in Jerusalem, chose Hungary this time to highlight the rise of far-right groups and anti-Semitism in Europe. More than half a million Hungarian Jews were killed in the Holocaust.
"The Israeli conquerors, these investors, should look for another country in the world for themselves because Hungary is not for sale," Jobbik chairman Gabor Vona told the rally near the neo-Gothic parliament along the Danube River.
"Our country has become subjugated to Zionism, it has become a target of colonisation while we, the indigenous people, can play only the role of extras," Marton Gyongyosi, a Jobbik member of parliament, told the crowd.
The rally ended after almost two hours and the protesters dispersed without incident.
WJC spokesman Michael Thaidigsmann said: "We find it a worrying sign that these people express their anti-Semitic and anti-Israeli ideology in such a public way."
Some foreign Jews have made or planned investments in post-communist Hungary, including US businessman Ronald Lauder who is president of the WJC, but those are dwarfed by far larger deals from other European and American businesses.
The charge, based on comments Peres made in 2007 about Israeli businesses abroad, has become a mantra in Jobbik's discourse about threats it says Hungary faces from Roma, Jews, the European Union and the International Monetary Fund.
"This kind of conspiracy theory has a long history in Hungary," said Peter Kreko, director of the Political Capital research and consulting company. Hungary's wartime fascist leaders used xenophobic charges to win support, he noted.
Security was tight at the hotel where the assembly is due to open on Sunday, and around Budapest's main synagogue in the wartime ghetto where Jews in Nazi-occupied Hungary were forced to live, and from which many thousands were taken and killed.
Police were also posted at the rally to ensure the protesters, including Jobbik's banned but tolerated Hungarian National Guard vigilantes in their black or camouflaged uniforms and black combat boots, stayed clear of the hotel.
Although the security forces were Hungarian, Jozsef Kozma, a 52-year-old carpenter at the rally, cited as fact a rumour that the Israeli intelligence service Mossad had sent 200 Israeli police and soldiers to Budapest to protect the assembly.
"Don't we have police of our own?" he asked.
Jobbik leaders occasionally issue provocative statements about Jews, such as a call by Gyongyosi last November to list all Jews in the government and parliament as potential national security risks. He later apologised but did not resign.
There are about 80,000-100,000 Jews among the 10 million population of Hungary, which was once a centre of Jewish life in Europe and has seen a modest revival since communism ended in 1989.
Jobbik's open hostility to Jews presents a challenge to Orban, whose Fidesz party is conservative and patriotic but opposed to anti-Semitism. Party leaders say Fidesz is unfairly accused abroad of anti-Semitism.
The WJC assembly is expected to issue a strong statement condemning growing far-right sentiment in Europe, especially in Hungary, Greece and Germany. — Reuters