More than 500 people were arrested in Montreal on Wednesday night as protestors defied controversial new law Bill 78

Protests that began in opposition to tuition fees in Canada have exploded into a political crisis with the mass arrest of hundreds of demonstrators amid a backlash against draconian emergency laws.

More than 500 people were arrested in a demonstration in Montreal on Wednesday night as protesters defied a controversial new law – Bill 78 – that places restrictions on the right to demonstrate. In Quebec City, police arrested 176 people under the provisions of the new law.

Demonstrators have been gathering in Montreal for just over 100 days to oppose tuition increases by the Quebec provincial government. On Tuesday, about 100 people were arrested after organisers say 300,000 people took the streets.

But what began as a protest against university fee increases has expanded to a wider movement to oppose Bill 78, which was rushed through by legislators in Quebec in response to the demonstrations. The bill imposes severe restrictions on protests, making it illegal for protesters to gather without having given police eight hours' notice and securing a permit.

On Wednesday night, police in Montreal used kettling techniques – officers surrounding groups of protesters and not allowing them in or out of the resulting circle – before conducting a mass arrest.

Police immediately declared Wednesday's protest illegal, but allowed it to continue for about four hours before surrounding protesters and making arrests.

Martine Desjardins, who represents more than 125,000 students in her role as president of the federation of university students in Quebec, said protesters had been "peaceful" on Wednesday's march.

"It makes a lot of people angry," she said. "We fear that tonight, because there will be more demonstrations going on, people will become a bit more violent, because as you saw yesterday, when you are peaceful, you get arrested."

Police arrested 518 people at the demonstration, the largest number detained in a single night so far. Montreal police constable Daniel Fortier, who told reporters rocks were thrown at police, said most of those arrested would face municipal bylaw infractions for being at an illegal assembly.

"I was so so scared," said Magdalena, one of those arrested, who asked that her last name not be given. She told the Guardian that she had been taking part in the protests since February, and that Wednesday night's action had actually seemed particularly peaceful.

"This was one of the most jovial I've taken part in," she said. "We were commenting how in good spirits we were, how everyone seemed in such great energy. There were families, children, women with strollers, which you don't necessarily see at the night protests as much," she said.

Protesters march against tuition fee hikes in Montreal, Canada. Photograph: Olivier Jean/Reuters

Protesters were allowed to walk freely and briskly through Montreal, she added, but that changed when they came to certain intersection, the pace of the march slowing dramatically. "We didn't think anything of it," Magdalena said. "All of a sudden you just smelled tear gas and could see smoke, and people were running."

Magdalena said people from the front of the march came running back past her and her friend, who had been strolling with their bicycles. "We turned around and there was already a line of cops behind us. We tried to go on the other side but then there was cops there too.

Police officers then tightened their ring around the "hundreds" of protesters, she said, not allowing anyone in or out. Magdalena said this situation continued for an hour, before everyone in the group was read their rights. After that, it was another "hour or two" before she was detained with plastic handcuffs and led to a city bus. She said they were then kept on the bus for "hours and hours" and were not allowed to go to the toilet. "I have some medical problems, and I wasn't feeling well. I really needed some water and I needed some sugar, and they were really awful, they said they didn't care," she said.

Magdalena said she was eventually charged with being part of an unlawful assembly, and given a ticket for $634, which she said she planned to contest.

Protesters have vowed to continue the nightly protests that began on 14 February when Quebec's liberal provincial government announced it would introduce tuition fee increases over a five-year period. The Quebec government's department of education, leisure and sport says fees would go up by $325 (£200) per year for five years from autumn 2012, a total increase of $1,625.

The protests have resulted in a backlash against the Quebec prime minister, Jean Charest, who has refused to back down over the tuition fee increase, and the new law.

Students have been boycotting classes over the past three months, arguing that the increases would lead to an increased dropout rate and more debt.

In response to the protests, the provincial government rushed through Bill 78 on 18 May. As well as the restrictions on protests, it suspends the current academic term and provides for when and how classes are to resume.

Some student organisers said that the introduction of the bill, far from cowing the demonstrations, had actually brought more support for their cause.

'This draconian law has revolted me'

Mathieu Murphy-Perron, who has been helping to organise demonstrations against tuition fees since last year, said: "I would say that I've seen more individuals come out and say: 'You know what? I was neutral on the question of tuition fees, but to bring this draconian law has revolted me and I will take to the streets with you.

"There have been more and more people who recognise that Bill 78 is a breach of the right of freedom of speech, freedom of assembly, freedom of association, and they're not going to have it."

Some legal experts argue that the bill contravenes Canada's charter of rights and freedoms. Montreal constitutional lawyer Julius Grey told the Vancouver Sun that Bill 78 was "flagrantly unconstitutional". Opposition has come from the Quebec Bar Association and the Quebec human rights commission.

In an appearance on NBC's Saturday Night Live in the US on Saturday night, the Grammy award-winning band Arcade Fire, who come from Montreal, wore symbolic red squares of cloth on their chests during their performance, in support of the protests.

Murphy-Perron said the red-hued, four sided shapes were visible "everywhere you go" in Montreal, adding that they show the "inter-generational aspect of this struggle".

"You see red squares on buildings, on homes, on children, on teenagers, on students, on bluehairs, you see them everywhere."

Desjardins said that she and other student representatives will meet with the government next week in Montreal or Quebec City to discuss tuition fees – the fourth meeting since strikes began.

In the meantime the daily marches would continue, she said, adding that protesters were also planning a protest in Ottawa, around 150 miles west of Montreal, on 29 May. Ottawa is in a different province from Montreal, and so safe from the clutches of Bill 78 – introduced only in Quebec.

"It's something to ridicule the bill," she said. "If we are restricted to have a demonstration in Montreal, or in the province, we are going to go outside the province, to Ontario, and have a big demonstration there."