Roughly 5,000 people protested across the country carrying posters with elder Fujimori's face and the words "murderer" and "thief."
Protesters called for the departure from office of Kuczynski, who later defended his decision in a televised message to the nation.
"Out, out PPK! Out, out PPK!" angry demonstrators chanted in reference to the president, who had promised during his electoral campaign the previous year that he would not free Fujimori.
"Fujimori, murderer and thief. No to the pardon!" read one of the signs held by the protesters, some of whom also carried a giant Peruvian flag.
Relatives of victims of Fujimori's brutal rule took part in the march.
"We are here as relatives to reject this illegal pardon, because it does not correspond to the gravity of the crimes," Gisella Ortiz, representative of a group of families of victims, told reporters.
A strong force of anti-riot police moved through the streets of Lima and sought to prevent the demonstrators from heading to the clinic where Fujimori is hospitalized, firing tear gas canisters and erecting barricades to disperse them.
A cameraman from the state television station TV Peru was beaten by police and was being treated in hospital, the station's president Hugo Coya wrote on Twitter.
In a message to the nation late Monday, Kuczynski called for an "effort at reconciliation," urging the protesters to "turn the page" and not be carried away by hate and "the negative emotions inherited from our past."
Kuczynski was accused of lying about his financial ties to the Brazilian construction giant Odebrecht, which paid hundreds of millions in bribes to public officials across Latin America in order to win lucrative public works contracts. Fujimori's powerful lawmaker daughter, Keiko Fujimori, led the impeachment drive in Congress but legislators loyal to the ex-president's son Kenji, also a lawmaker, killed the effort by abstaining.
Kenji Fujimori has long pushed for his father's release from prison and Kuczynski's opponents said the pardon was clearly payback for the abstentions that ended the impeachment drive. With Kuczynski under criminal investigation for his Odebrecht ties and weighed down by an 18 percent approval rating, observers said his long-term political survival still appears to be in jeopardy.
"The pardon opens a Pandora's Box — the haste with which it was taken makes Kuczynski even more vulnerable," said Jose Carlos Requena, an analyst with political consulting firm 50+1.
Kuczynski's business, Westfield Capital, received $782,000 from Odebrecht more than a decade ago. Kuczynski had denied any ties to the company until the evidence was made public this year. He later said that none of the contracts in question contained his signature and he had no knowledge of the payments.
Fujimori, president from 1990 to 2000, is remembered both for stabilizing the economy and defeating the Shining Path; and for human rights violations and corruption.
He was moved to a clinic Saturday for what his doctors said was heart arrhythmia. His supporters said he would remain there until he was healthy enough to leave.
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