Members of the group Hawaiian Kingdom Government posted no trespassing signs on the gates, KGMB-TV reported.
"We're here today because it is time for the Hawaiian Kingdom Government to take its rightful place as the rightful government here," said Mahealani Kahau, a member of the group. "This was the original seat of government as of 1892."
The protesters ended their blockade about 2 p.m. but said they would return Thursday, the TV station reported.
State Sen. J. Kalani English, a native Hawaiian, expressed interest in seeing a peaceful resolution to the group's concerns.
"I just hope we can resolve this very peacefully and we can come to an understanding that everybody's satisfied on," English said.
Iolani Palace officials issued a statement noting the palace was not the original seat of government but was the royal residence.