Some 25,000 Spanish protesters have defied a government ban and camped out overnight in a square in the capital, Madrid.
The protesters are angry with the government's economic policies and have occupied the area for the past week.
Spain's electoral commission had ordered them to leave ahead of local elections on Sunday.
But as the ban came into effect at midnight, the crowds started cheering and police did not move in.
The protest began six days ago in Madrid's Puerta del Sol as a spontaneous sit-in by young Spaniards frustrated at 45% youth unemployment.
The crowd has grown in the capital and has spread to cities across the country. Hundreds have camped out each night in Madrid.
They are demanding jobs, better living standards, a fairer system of democracy and changes to the Socialist government's austerity plans.
"They want to leave us without public health, without public education, half of our youth is unemployed, they have risen the age of our retirement as well," said protester Natividad Garcia.
"This is an absolute attack on what little state welfare we had."
Another protester said she was taking part because she had no employment prospects despite having a degree.
"This should make the political classes aware that something is not right," said 25-year old Inma Moreno.
Many of the participants have drawn parallels between their actions and the pro-democracy protests in central Cairo that revolutionised Egypt.
Political rallies are banned under Spanish law on the day before elections to allow for a "day of reflection" - a ruling which was upheld by the electoral commission.
Some protesters had said they feared a police crackdown, but Interior Minister Alfredo Perez Rubalcaba said the police were "not going to resolve one problem by creating another".
As the midnight deadline to disperse approached, many of the protesters wore tape over their mouths to imply they felt they were being prevented from speaking.
The BBC's Sarah Rainsford, in Madrid, said there was a moment's silence as the ban came into effect, before the square erupted in jeers, cheers and chanting.
Police were on the scene but did not intervene and the outdoor sit-in appears to be growing rather than ending, says our correspondent.
What started as a spontaneous movement now looks like it could be here to stay for some time, she says.
Spain's 21.3% unemployment rate is the highest in the EU - a record 4.9 million are jobless, many of them young people.
Prime Minister Jose Luis Rodriguez Zapatero has expressed some sympathy for the protesters, noting their "peaceful manner".
"My obligation is to listen, be sensitive, try to give an answer from the government so that we can recover the economy and employment as soon as possible," he told radio Cadena Ser.
However, his Socialist government is expected to fare badly in Sunday's local and regional elections.