Local residents of Ostritz, which lies on Germany's border with Poland, held a two-day festival for peace to protest against a neo-Nazi gathering.
Hundreds of neo-Nazis gathered in the town for a far-right music festival.
The two-day Shield and Sword event opened on Friday - the anniversary of Hitler's birthday.
Festival merchandise includes t-shirts bearing the logo "I heart HTLR" and toy replicas of Nazi-era tanks.
Germany has strict laws on hate speech and symbols linked to the Nazis, who were in power from 1933 to 1945. Police making checks in the area arrested a man who they say made a “Heil Hitler” salute.
On the gates of the festival grounds, a poster from the far-right National Democratic Party protesting the recent influx of migrants to Germany with the slogan: “Nursery schools not asylum camps”.
German media reported that more than 1,000 people turned out for the anti-fascist festival for peace on Friday, ahead of a cycling event to protest against the neo-Nazis on Saturday.