It was the first major demonstration by victims' groups on the sensitive issue of imprisoned ETA members in 2015, a year of regional and national elections.
Under red and yellow Spanish flags and placards reading "No more betrayals", the crowd of more than 1,000 people rallied on the central Plaza de Colon. They accused Prime Minister Mariano Rajoy's government of breaking its electoral promise to crush ETA and defend its victims.
"We feel betrayed by this government," said Angeles Pedraza, leader of the Association of Victims of Terrorism, which organised the protest. "The same leaders who joined us in mourning our dead are not by our sides now," she told the crowd.
"More than 100 ETA members have come out of prison and they are received like heroes."
ETA is blamed for the deaths of 829 people in a four-decade campaign of shootings and bombings to create an independent homeland in northern Spain and southern France. In October 2011 it declared a "definitive end to armed activity," but has not formally disarmed and disbanded as the Spanish and French governments demand.
A 2013 ruling by the European Court of Human Rights prompted Spain to release scores of convicted ETA members earlier than planned. Others have been released after a Spanish judge ruled that years spent in jail in France could be deducted from their sentences in Spain.
On the other hand, authorities have cracked down on certain Basque suspects in recent weeks in a series of arrests.
Interior Minister Jorge Fernandez Diaz insisted the government was set on crushing ETA and reached out to the protesters.
"The victims of terrorism are important examples to us. Their dignity and their ethical and moral standing are absolutely indispensible," he told a conference of the ruling People's Party.
The party faces regional elections in May and a general election due in November. At demo, Chon Lopez, 68, held a photograph of her brother Francisco, a Civil Guard lieutenant who she said was killed in an ETA bomb attack in 1980.
"I have always been a member of the Popular Party, but I will not vote for them this time," she told AFP.