The “Unite the Right 2” event was planned for 5.30pm local time (9.30pm GMT) on Sunday in Lafayette Square, near to the White House.
Some 20 white nationalists arrived at around 3pm to march and hear alt-right leader Jason Kessler speak after last year’s violent demonstration.
But they were outnumbered by thousands of counterprotesters, including the anti-facist group Antifa, who denounced racism and white supremacy.
Footage from the scene showed police and demonstrators clash as officers tried to escort the white nationalists away following the rally.
Reporters at the scene said it appeared protesters might block the white nationalists’ exit.
Unite the Right supporters allegedly threw water bottles and liquids at their opponents.
There was an enormous police presence to keep both sides apart and avoid the street brawls that broke out last year in downtown Charlottesville.
But tensions rose as the two counter protests combined following the white nationalist rally.
Antifa anti-protesters arrived, donning black shirts and bandanas covering their face, and could be heard chanting “Anytime, any place, punch a Nazi in the face”.
Members of the group were pictured burning a Confederate battle flag on Lafeyette Square.
At the head of the white nationalist group was organiser Kessler, who also organised last year’s event in Charlottesville.
His event permit application said that between 100 and 400 people were expected to attend the “white civil rights rally”.
Mr Kessler emerged at around 3pm local time with a handful of fellow demonstrators from a subway station holding an American flag and walked toward the White House.
Counterprotesters who held signs declaring “No Hate” had awaited their arrival, chanting “Nazis go home” and “Shut it down”.
A local woman, Heather Heyer, was killed when an Ohio man, James Fields, drove his car into a crowd of counterprotesters.
At the time, US President Donald Trump said there were “very fine people” on both sides, spurring criticism from across the political divide that he was equating the counterprotesters with the rally attendees, who included neo-Nazis and other white supremacists.
On Saturday, Mr Trump condemned “all types of racism” in a Twitter post marking the anniversary.
Uniformed police officers and a line of police barricades divided Lafeyette Square park in half, restricting the counterprotesters to the northern half, furthest away from the White House.
Anti-racist protesters began gathering on Sunday as part of a series of counterprotests planned in the US capital.
More than 1,000 protesters descended on Freedom Plaza early afternoon to oppose the demonstration.
Makia Green, who represents the Washington branch of Black Lives Matter, told Sunday’s crowd at Freedom Plaza: “We know from experience that ignoring white nationalism doesn’t work.”
The counterprotesters planned to march to Lafayette Square in front of the White House, just before the arrival of the white nationalists.
Police erected a maze of barricades to keep the two sides apart.
Meanwhile more than 100 people gathered at a Charlottesville city park on Sunday to mark the one year anniversary.
The demonstrators gathered in Washington Park before marching downtown to the site of Ms Heyer’s death, some arm in arm.
Chants including “cops and Klan go hand in hand” were heard from the group.