In one tense standoff, police charged at the students with batons, after which the protesters withdrew, some with blood on their faces, to the city centre where they continued demonstrating.
The students were protesting what they called the "devaluation" of their qualifications, and called on Superior Education Minister Rachid Harroubia to resign.
The demonstrators, who came from several districts of the country, did not succeed in reaching the government buildings, where the prime minister was, on account of a strong police presence in all the side streets.
They were also stopped from approaching the president's residence.
"We remain revolutionaries," the protesters chanted in Arabic, and "We have had enough of this power" in French.
"The situation will become more serious in the coming weeks," warned Sofiane Khelladi, president of the General Union of Algerian Students.
"We study in dilapidated classes," complained Massi Benbrahin, a fifth-year engineering student, complaining that universities did not assist students with on-the-job training.
"Without contacts or friends in high places, a diploma does not guarantee you work," said Hicham, a computer sciences student.
Young, university-qualified Algerians battle finding work in a country where the state is the biggest employer.
Foreign companies in Algiers often complain of the low education levels of the country's graduates in a country that has 1.2 million university students.
At the end of their studies, many young Algerians try to find work elsewhere, mainly in France where they form one of the biggest foreign communities.
But Algerian diplomas are not recognised in Europe, having failed to align its higher education programmes to those of the continent which harmonised its university courses in 1999.
The Algerian protests are the latest in a string of uprisings around the Arab world in recent months by citizens demanding reforms.
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