Though the land in question is in the port city of Colon, protests spread to Panama City, where protesters battled police with sticks and rocks, and police fired tear gas.
Construction workers briefly blocked roadways in the capital, including on that leads to the city's airport, and staged marches in sympathy with the protests in Colon.
Roberto Henriquez, the chief of staff for President Ricardo Martinelli, said the government will repeal a law passed a week ago that allowed the government to sell land it currently leases to companies in the duty-free zone.
Henriquez said Friday Martinelli's cabinet will meet Sunday and "the law will be repealed." Martinelli has been abroad on an official trip and is scheduled to return Saturday.
Protesters said the land is already being rented and it makes no sense to sell it. They said the government should instead raise the rent and invest the money in Colon, a poor and violent city.
The duty-free zone has about 2,000 companies that rent land and employ 30,000 people, according to authorities. The government estimates land sales could raise $2 billion over the next 20 years.