Demonstrators, brandishing a sea of red flags of Spain's major UGT and CCOO unions, marched down the Spanish capital's main streets towards the central Puerta del Sol square.
One of the protesters, 35-year-old automobile salesman Jose Luis Rodriguez, said he had chosen to lose a day's pay to defend his rights by striking for the first time in his life.
"This strike day is going to cost me 60 euros ($80). It is not much compared to what they might take from me tomorrow with the reform. They can throw me into the street," he charged.
"They are attacking workers' rights. If we don't go into the streets they won't know we're against the reform."
Prime Minister Mariano Rajoy's conservative government says the new labour law, which makes it cheaper to lay off staff and easier to cut salaries, is needed to attack Spain's 22.85-percent jobless rate.
The government predicts the unemployment rate, already the highest among industralised nations, will rise to 24.3 percent this year as another 630,000 people lose their jobs.
But unions say the economy, not the law, is to blame for Spain's employment woes.
"I hope this demonstration will be of some use, that the reform will be changed. Today dismissing someone is almost free," complained 38-year-old unemployed saleswoman Maria Jose Velasco.
Spain's biggest unions called the 24-hour strike over the labour reform, urging the government to enter into negotiations and find a compromise over the new labour law.
After a day of patchy participation in the general strike, in part because of an agreement guaranteeing minimum services in public transport, unions have called evening protests in about 100 cities and towns.