Participants are demanding democratic reform and protesting against the leadership of the current chief executive, CY Leung.

Hong Kong's top official is currently chosen by a group of 1,200 electors.

Mr Leung said that the Hong Kong government was committed to introducing full democracy by 2017.

Speaking at a ceremony early in the day, he described "implementation of universal suffrage for the chief executive election in 2017" as a "major task" for the Hong Kong government.

"We hope that people holding different views can set aside their differences and seek consensus as far as possible in an accommodating, pragmatic and peaceful manner," he added.

However, pro-democracy activists say progress on reform has been slow and fear interference in the nomination process from Beijing.

"The right to elect a chief executive is a basic political right, which we have been denied for many years," said pro-democracy lawmaker Albert Ho.

"We can't afford to wait any longer."

Organisers said they expected up to 400,000 people to take part in the march.

Protesters gathered in Victoria Park on Hong Kong Island, before starting the march to Central, Hong Kong's main financial district.

Two hours after the rally had started, there were still new protesters entering the park to join the march, Hong Kong media reported.

Participants could be heard shouting "CY Leung step down!" and "protect Hong Kong!"

James Lam, a protestor, said: "I am here to fight for democracy and freedom. If Hong Kong people did not come out to fight for our freedom, we would lose it in the future."

Some also held up posters calling for the release of Nobel Peace Laureate Liu Xiaobo, who is in jail in mainland China on subversion charges.

In an indication of the level of anti-China sentiment amongst some protesters, a number of participants held up Hong Kong's colonial flag, which was used prior to 1997, when the city was a British colony.

In addition to demanding universal suffrage, protestors are also rallying against high property prices and income inequality.

The march takes place on the anniversary of Hong Kong's handover to China in 1997.

A pro-government rally and a pop concert are also being held on 1 July, which is a public holiday in Hong Kong. Some retailers are also offering major city-wide discounts on Monday.

Critics have described these as attempts to draw people away from the pro-democracy march.

The demonstration has become an annual event since 2003, when 500,000 protestors turned out in opposition to a proposed national security bill and the economic downturn.

The protest contributed to then chief executive Tung Chee-hwa resigning the following year.

Hong Kong, a British colony until 1997, has a comparatively high degree of autonomy from Beijing.

It is governed under the principle of "one country, two systems", under which China has agreed to give the region a high degree of autonomy and to preserve its economic and social systems for 50 years from the date of the handover.