Schools and universities were closed in Gaza so that students could attend the event.
Speaking at the rally, Hamas political leader Ismail Haniyeh said that the organization's military wing was on its guard following a botched IDF commando operation in Gaza in November, which triggered days of spiraling tensions, Palestinian rocket fire and Israeli airstrikes before an internationally brokered truce took hold.
He warned that any Israeli troops who entered Gaza in future faced death or captivity.
"The entry and exit points of the IDF special force that infiltrated Gaza, are known to the (Hamas) military wing, as well as the times of entry and exit," Haniyeh said. "Any IDF soldier who attempts to enter Gaza will be killed or caught."
"The masses participating in the rally today are the best response to those who imposed a siege on us and fought against us," Haniyeh said. Today the Palestinian nation says that resistance is their choice... We say to the prisoners in Israeli jails that your release is our responsibility and our priority. It will not be long before we free you."
Haniyeh also lashed out at the apparent increasing reduction in friction between Israel and a number of Arab states.
"Do not think that the normalization by a number of organizations is an Israeli achievement," he said. "The Arab Muslim nation despises Israel."
The Hamas leader then touched on the resignation of former Israeli defense minister Avigdor Lieberman, who quit the coalition over what he said was a lackluster Israeli response to the recent violence in Gaza. He also mocked the recent failure of an American and Israeli attempt to condemn the terror group at the United Nations.
"Lieberman fell and the (Palestinian) resistance remained, and the Americans together with Israel tried to defeat us at the UN, and finally were defeated by themselves," he told the crowd.
Prime Minister Benjamin Netanyahu, meanwhile, had his own harsh words for Hamas on Sunday, following deadly attacks in the West Bank that have been linked to the terror group.
"I sent a clear message to Hamas: We will not accept a situation in which there is a ceasefire in Gaza and terrorism in Judea and Samaria (West Bank)," the prime minister said at his weekly cabinet meeting on Sunday. "We will exact a heavy price for this," he warned.