Lebanon's president Michel Aoun will hold binding consultations with members of parliament on Thursday to designate the country's next prime minister.
After provocative statements by the president and the killing of a demonstrator by the army, the protest movement is re-energized.
Though no immediate estimate of the rally's size was available, many thousands spread across a roadway leading to the palace.
"I am afraid that there are those who want to take our country and generate social, security and political tensions and to take it to civil war," Nasrallah said.
Protesters were disappointed by his speech; more demonstrators arrived, sticking even more to their demands, including that the entire government must step down – including Hezbollah.
"The irony is that they want to challenge and threaten the world and then ask it for help and money."
Lebanese President Michel Aoun said on Monday the US withdrawal from world powers' 2015 nuclear agreement with Iran would have negative consequences for Middle East stability.
The post of prime minister is reserved for a Sunni Muslim in Lebanon's sectarian power sharing system.
The apparent gains made on Sunday by a Hezbollah-backed alliance risk complicating Western policy towards Lebanon.
Classified as a terrorist group by the United States, Hezbollah is an arch foe of Israel which is deeply alarmed by Iran's growing influence in the region.