In the first such protest in four years, they also demanded the release of four transsexual women as they gathered outside the Hbeish gendarmerie in Beirut, where activists say morality police often hold such suspects.
"Homosexuality is not a disease," and "Sex is not illegal -- your law is archaic," read a placard at the event organised by the Lebanon-based Helem association, considered to be the most important Arab group defending LGBT rights.
"Repeal 534" could also be read, a reference to the article in the Lebanese penal code under which sexual relations "against nature" are outlawed and punishable by up to one year in prison.
Helem chief Genwa Samhat told AFP the sit-in, two days before the International Day against Homophobia, Transphobia and Biphobia, "calls for the abolition of this section of law dating from the (1920-1943) French mandate in Lebanon".
"Most people arrested under this law aren't detained in the act but in the street because of their appearance," she said.
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While Lebanon is considered more tolerant of LGBT issues than other Arab states, police still stage regular raids on nightclubs and other venues frequented by homosexuals.
Homosexuality is also often ridiculed on television shows.
The last such protest in Beirut was in 2012, when dozens demonstrated outside a court to protest against the use of an anal "test" for suspected gay men.
"These tests continue, despite the justice ministry asking police to stop the practice," Samhat said. "This is humiliating."
"Arrested people are still screened for AIDS, while this should be voluntary. There is a preconceived idea that all homosexuals have AIDS," she added.
"People also continue to be sacked if their boss finds out they're gay. They're made to say they quit voluntarily for fear of being denounced."
An event on Sunday organised by the pro-LGBT Proud Lebanon group was cancelled under pressure from Christian religious authorities, organisers told AFP.