The demonstrators were believed to be from the "Muslims Against Crusades" group, which was outlawed in Britain last month amid fears it would burn poppies on Armistice Day celebrations, sources said.
A spokesman for the London's Metropolitan Police said it had arrested 20 people "for further investigation around being suspected of being a member of a proscribed group."
"There were two further arrests, one for obstruction, one for violent disorder. They are currently in custody," the spokesman told AFP, confirming that the arrests were outside the US embassy.
A police source confirmed the banned group was Muslims Against Crusades.
The Press Association news agency said the demonstration was in protest against attacks by US drones targeting militants in Pakistan and that a number of demonstrators remained at the scene.
Britain announced on November 11 that being a member of Muslims Against Crusades group had been banned.
Interior minister Theresa May said at the time that the organisation had already been proscribed under a number of names, including Al Ghurabaa and Islam4UK.
In response, the group said it was disbanding and also cancelling a "Hell for Heroes" demonstration planned to disrupt ceremonies held every year on November 11 to mark Armistice Day.
But it said that the "call for Islam will never be silenced by any ban or proscription".
At a protest in London on November 11 last year, the group provoked anger by burning poppies and chanting "British soldiers burn in hell." The group has since been banned in England.
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@Falcon: Have to agree with you here. Bad timing by the authorities. @ali tanoli: Laws regarding FoS vary by country. For cursory knowledge of FoS laws in Britain below is the wiki link. Read up on it if you want to... Freedom of Speech by Country: United Kingdom
@MJ Can u list what includes the freedom of speech may be just what queens tells u ????
@ali tanoli: Freedom of speech does not include the right to preach violence.
Bad Timing. It would have been better if they had caught these banned group members before the rally. This sends out an unhealthy signal to those taking part in protests against current state of Britain's foreign policy.
freedom of speech in queensland???????