Tens of thousands of followers of Pakistani-Canadian cleric Tahir-ul Qadri massed near parliament house, where they were dug in for the long haul with stocks of food and bedding.
A general election is due to be held by mid-May, but Qadri wants parliament dissolved immediately and a caretaker government set up in consultation with the military and the judiciary, to implement key reforms before the polls are held.
As Qadri delivered a fiery speech to his supporters on Tuesday, berating "corrupt and incompetent" politicians for the country's woes, the Supreme Court issued an order to arrest Prime Minister Raja Pervez Ashraf and 16 others over graft allegations in power generation projects in 2010.
The court order instructed officials to arrest "without any hesitation" those accused in the case, and for the chairman and officials from the National Accountability Bureau corruption watchdog to report to the court on Thursday.
The ruling stoked an already febrile political atmosphere and while analysts said it was unlikely to force Ashraf out of office, they warned the timing would fuel rumours about a judicial-military conspiracy.
Qadri's sudden -- and apparently well-financed -- emergence as a political force is seen by critics as a ploy by elements of the establishment, particularly the armed forces, to delay the elections and sow political chaos.
Nuclear-armed Pakistan, struggling with a weak economy and bloody Islamist insurgency, has seen three military coups during its 65-year history.
Security officials estimated the size of the Islamabad crowd at between 25,000 and 50,000, which would make it the largest political protest in the capital since the government led by the Pakistan People's Party (PPP) was elected in 2008.
Qadri is to address the crowd at 1:00 pm (0800 GMT) and one of the protest organisers, Mian Mumtaz, said he was likely to elaborate on his future course of action.
His deputy Sadiq Qureshi on Tuesday hailed the Supreme Court ruling -- greeted by the crowd with dancing and cheering -- as their "first victory" and pledged to stay in the capital until their demands were met.
Qadri, a frenzied orator, led his followers into the capital in the early hours of Tuesday, at the climax of a 38-hour journey from the eastern city of Lahore.
"We slept under open sky but we did not feel cold despite severe winter. We want change and when you are on a mission you forget everything," Qadri supporter Shabaan Alvi, 57, told AFP.
Police clashed briefly with stone throwers and protesters brandishing sticks on Tuesday, shooting into the air and firing tear gas. Eight officers were injured.
Organisers of the rally accused police of opening fire and of attempting to arrest Qadri.