About 300 stateless Arabs, also known as bidoons, began the protest immediately after noon Friday prayers in Jahra city, 50 kilometers (31 miles) west of Kuwait City, demanding rights and citizenship.
The crowds quickly swelled into around 1,000 despite heavy police presence as the peaceful protest turned violent.
Some of the protesters were carrying copies of the Muslim holy book, the Koran, and chanting slogans of "God is Greatest," while demanding a solution to their decades-old problem.
They also carried Kuwaiti flags and portraits of the ruler and chanted: "the people want the rights of bidoons (stateless people)," who have been deprived of their basic rights of education, health and jobs.
Security officials tried in vain to convince them to disperse, and the situation became tense when some of the protesters threw rocks at security men, who are armed with batons and tear gas canisters.
The protesters also raised slogans against Saleh al-Fadhalah, a former MP who was recently appointed to lead a newly created government body entrusted with resolving the issue of the bidoons.
Several MPs warned the government from using force against the protesters and blamed it for failing to resolve the problem.
"We call for dealing peacefully with the bidoons demonstration and warn against the use of force or arresting the protesters," Islamist MP Jamaan al-Harabsh said in a statement.
"The protest of bidoons is legitimate and the government is responsible for this because it has failed to resolve the problem," independent MP Daifallah Buramia said.
Stateless Arabs, estimated at more than 100,000, claim they have the right to Kuwaiti citizenship, but the government says that ancestors of many of them came from neighbouring countries and they are not entitled to nationality.
Kuwait launched a crackdown on them in 2000, depriving them of their essential rights in a bid to force them to reveal what the authorities say are their true identities.
Many bidoons have no right to a driver's licence, cannot get birth certificates for their babies or death certificates for the dead. They are also banned from getting their marriage contracts attested.
Due to stringent government restrictions, a majority of them are living in dire economic conditions in oil-rich Kuwait, where the average monthly salary of native citizens is more than $3,500 (2,575 euros).
Authorities said that following the crackdown, some 20,000 bidoons disclosed their original citizenship and were given residence permits like other foreigners.
Most bidoons claim to be Kuwaitis whose forefathers, who lived as Bedouins in the desert, failed to apply for citizenship when the state first introduced its nationality law in 1959.