The decision infuriated the victim’s family as well as Jewish groups, and prompted President Emmanuel Macron to urge a change in French law to ensure people face responsibility for violent crimes while under the influence of drugs.
Sarah Halimi was pushed out the window of her Paris flat by neighbour Kobili Traore, 27, who shouted “Allahu Akbar” (“God is greatest” in Arabic).
The country’s highest court said this month that while the murder was anti-Semitic, Traore was not mentally fit to stand trial.
He has been in psychiatric care since Halimi’s death.
“The clamour has risen and hope has returned. That hope is all of you here,” Halimi’s brother William Attal told a crowd of several thousand at the Trocadero esplanade in Paris.
The MP who leads Macron’s Republic on the Move party, Christophe Castaner, addressed the protest, which was also attended by opposition leaders and by several well-known actors.
Former French first lady Carla Bruni, wife of Nicolas Sarkozy, also appeared at the Paris rally, as did Mayor Anne Hidalgo, who said the city would soon name a street in Halimi’s memory.
“It will also be a way of doing her justice,” Hidalgo said.
Justice Minister Eric Dupond-Moretti confirmed on Sunday that a new penal responsibility law would be presented by end May to fill a “legal void”.
But France’s CSM judiciary council rejected the government’s “disparagement” on Sunday and insisted that judges had correctly applied the law in a “painful” case.
Between 1,500 and 2,000 people also marched at a protest in the Mediterranean city of Marseille, while around 600 gathered outside a synagogue in the eastern city of Strasbourg, authorities said, and smaller protests took place in cities including Lyon.
Jewish groups say the court ruling has made Jews less safe in France, while lawyers representing Halimi’s family have said they will take the case to the European Court of Human Rights. Halimi’s sister could also bring a case before courts in Israel.
French Jews have been repeatedly targeted by jihadists in recent years, most notably in 2012, when an Islamist gunman shot dead three children and a teacher at a Jewish school in the southern city of Toulouse.
In 2015, a pro-Islamic State radical gunned down four people at a Jewish supermarket in Paris.