The authorities had urged citizens to protest what was called an "American plan to annex Bahrain to Saudi Arabia and express their anger against the lackey regimes of Al-Khalifa and Al-Saud," the dynasties ruling the two countries.
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Media reports said demonstrators in the capital, many brandishing the Bahraini flag, shouted "death" to America, Israel, the "traitors" Al-Saud and Al-Khalifa.
Official media also reported protests in other cities.
The planned union between Bahrain and Saudi Arabia has triggered a war of words between Shiite-dominated Iran and the Sunni rulers of Shiite-majority Bahrain.
This weeks Tehran Friday prayer leader Ayatollah Kazem Sedighi said the "US-Zionist plot" to create a union between will fail.
"Recently ... (Riyadh and Manama) came up with this plot to annex Bahrain to Saudi Arabia ... They call it a union but they want Bahrain to lose its identity instead of giving in to its people's demands," the cleric said on state radio.
"This is US-Zionist conspiracy and they should know that the Muslim people of the world and the Iranians will not tolerate this plot ... Saudi Arabia did not prevail by its military presence there, and will gain nothing in this plot except disgrace," he added.
Tensions have escalated between Iran and its Gulf Arab neighbors since a Saudi-led Gulf force rolled into Bahrain in March 2011 to boost the kingdom's security forces, which then crushed a month-old Shiite-led uprising against the regime.
Iran has repeatedly voiced support for the protests in Bahrain and strongly condemned the deployment of Saudi-led forces.
State media reported on Friday that Tehran has summoned Bahrain's charge d'affaires in Tehran after Foreign Minister Sheikh Khaled bin Ahmad al-Khalifa warned Iran on Thursday to stop meddling in its internal affairs.
Tehran "rejects comments made by the Bahraini foreign minister and hopes that the Bahraini government finds a suitable solution to the developments there," the reports quoted a foreign ministry official as saying.
"The only way out of the existing problems is to respond to the legitimate demands of the Bahraini people," the official added.
Sheikh Khaled said the union is a "demand by the people" of the Gulf Cooperation Council.
The minister said "every once in a while, we hear Iranian claims that Bahrain is the 14th governorate" of the Islamic republic and that Bahrainis want to "return to the motherland."
Saudi Arabia has also told Iran to keep out of its relations with Bahrain, where dozens of people, mostly Shiites, have been killed in violence since February 2011.
Iran hit back on Thursday, with foreign ministry spokesman Ramin Mehmanparast saying "the proposed union or annexation of Bahrain to Saudi Arabia" would lead to the "disappearance" of the Gulf archipelago.