Protesters took aim at officials, including the head of the eastern-based Libyan parliament, Aguila Saleh, during the demonstration outside the Sahaba Mosque. Some sat on the roof in front of its golden dome, a Derna landmark.
Later in the evening, angry protesters set fire to the house of the man who was Derna mayor at the time of the flood, Abdulmenam al-Ghaithi, his office manager told Reuters.
Hichem Abu Chkiouat, a minister in the eastern Libyan government, said Ghaithi has been suspended from his post. Reuters could not immediately reach Ghaithi for comment.
The parallel government in eastern Libya said the prime minister Usama Hamad dismissed all the members of Derna's municipal council and referred them to investigation.
Monday's protest marks the first large demonstration since the flood, which swept through Derna when two dams in the hills outside the city failed during a powerful storm, unleashing a devastating torrent.
"Aguila we don't want you! All Libyans are brothers!" protesters chanted, calling for national unity in a country left politically fractured by more than a decade of conflict and chaos.
Mansour, a student taking part in the protest, said he wanted an urgent investigation into the collapse of the dams, which "made us lose thousands of our beloved people".
Taha Miftah, 39, said the protest was a message that "the governments have failed to manage the crisis", adding that the parliament was especially to blame.
He called for an international inquiry into the disaster and "for reconstruction under international supervision".
The full scale of the death toll has yet to emerge, with thousands of people still missing. Officials have given widely varying death tolls. The World Health Organization has confirmed 3,922 deaths.
Saleh last week sought to deflect blame from authorities, describing the flood as an "unprecedented natural disaster" and saying people should not focus on what could or should have been done.
But commentators have drawn attention to warnings given in advance, including an academic paper published last year by a hydrologist outlining the city's vulnerability to floods and the urgent need to maintain the dams that protected it.
Derna is located in eastern Libya, a part of the country controlled by military commander Khalifa Haftar and overseen by a government established in parallel to the internationally recognised administration in Tripoli, in the west.
