1 September 2012 Last updated at 10:50 ET
The demonstrators burned Hungarian flags and pelted the mission with eggs.
Earlier this week Hungary allowed an Azeri soldier who murdered an Armenian to return to Azerbaijan to serve the remainder of his sentence. But Baku pardoned him and set him free.
Armenia, a long-time enemy of neighbour Azerbaijan, severed diplomatic ties with Hungary in response.
Armenia and Azerbaijan fought a bitter war over the Nagorno-Karabakh enclave in the early 1990s.
Killer Ramil Safarov was flown to Baku and freed, despite Azerbaijan’s assurances that his life sentence would be enforced.
On Saturday, hundreds of angry Armenian demonstrators chanted anti-Hungarian slogans during the protest rally in central Yerevan.
The demonstrators also publicly burned Hungarian flags and distributed flyers that read “Hungary – have you gone mad?”
There were also reports that Armenian hackers attacked the officials website of Azerbaijan’s president and several other internet news resources.
On Friday, Armenian President Serzh Sarkisian said that Hungary had made a “grave mistake” in sending
Safarov back to Azerbaijan.
“With their joint actions, Azerbaijan and Hungary opened the door to the recurrence of such crimes. I cannot put up with this. The republic of Armenia cannot put up with this,” the president said.
The Hungarian authorities said they had returned Safarov to his homeland only after receiving assurances from the Baku government that his sentence would be enforced.
Safarov killed Armenian soldier Gurgen Markarian at a military academy in Budapest in 2004, where both servicemen attended English-language courses organised by Nato.
During his trial in Hungary, Safarov said that the Azeri-Armenian war over Nagorno-Karabakh and insults from the Armenian officer were at the root of his actions.
Azerbaijan and Armenia, both former Soviet republics, fought over the enclave in the early 1990s. The conflict left some 30,000 people dead and displaced hundreds of thousands.
Armenia-backed authorities are currently controlling Nagorno-Karabakh, which lies within Azerbaijan.
Despite a 1994 ceasefire, skirmishes continue on the borders of the disputed territory.