The opposition has vowed to stage three straight days of protests against President William Ruto's government, alarming the international community which has joined calls for a political solution to the crisis.
It is the third time this month that opposition leader Raila Odinga has staged mass rallies against a government he says is illegitimate and to blame for a cost-of-living crisis.
Schools and shops were closed in Nairobi and other cities, and many frustrated Kenyans urged the two sides to bridge the impasse.
Police fired tear gas at scattered groups of demonstrators in Nairobi's Kibera slum, an Odinga stronghold, while offices in the capital's business district were largely shuttered.
In previous rallies, police used not just tear gas but live rounds to disperse stone-throwing protesters, drawing accusations of heavy-handedness from civil groups.
On the eve of Wednesday's demonstration, police described the protests as a "threat to national security," and the government declared it would not allow lawlessness to go unchecked.
"Anyone planning to unleash violence on Kenyans is hereby warned to cease and desist," said Interior Minister Kithure Kindiki, adding that all available security resources had been deployed to maintain order.
The demonstrations have divided Kenyans, who are struggling to cope with high inflation and a jobs crisis.
Fred Onzere, a 47-year-old unemployed man, told AFP that Kenya was "going in the wrong direction" and said he supported the protests.
Others said the shutdowns would only worsen the country's economic problems.
"Even if we are (employed)... we can't work," said businessman Peter Kajinji, 62.
"It's better for our leaders to sit together, talk and solve this problem," he told AFP.
Ruto, a former deputy president, rose to the top job after winning a narrow election victory last August over Odinga, who claimed the vote was "stolen."
But he took office as Kenya's economy reeled from debt and soaring inflation, and was criticised for raising taxes despite campaigning to bring prices down.
Kenya is seen as a stable democracy in the often-turbulent East Africa region, and 13 western nations issued a joint statement on Tuesday expressing concern over the violence in recent demonstrations.
"We... urge all parties to table their concerns through a meaningful dialogue and resolve their differences peacefully to build the nation together, ensuring no further loss of life," the foreign missions said.
Each day of protest costs the economy an average of three billion shillings ($21.8 million), according to an estimate by the Kenya Private Sector Alliance.
The National Cohesion and Integration Commission, a state agency, reported incidents of ethnically-motivated violence during last week's protests, and warned that gangs were using the chaos to target innocent people.
Odinga called off an earlier bout of anti-government demonstrations in May after Ruto agreed to dialogue, but the talks broke down.