Indigenous senator Lidia Thorpe strode up the central aisle of the Great Hall of Parliament House after the King's address to an official reception to tell him she did not accept his sovereignty.
King Charles turned to Prime Minister Anthony Albanese and talked quietly on the podium of the Great Hall as security moved to prevent Senator Thorpe from approaching the monarch.
"You are not our king … Give us our land back … You destroyed our land … We want treaty," Senator Thorpe could be heard shouting as she was escorted away.
Undeterred by the interruption, the royal couple continued to meet guests at the event including former prime ministers John Howard and Tony Abbott, mining executive Andrew Forrest, and Olympic gold medallist Jess Fox.
The King paid respects to Canberra's traditional owners and spoke of witnessing Australia's "sometimes difficult journey towards reconciliation".
"Throughout my life, Australia's First Nations peoples have done me the great honour of sharing so generously their stories and cultures," he said.
"I can only say how much my own experience has been shaped and strengthened by such tradition and wisdom."
Mr Albanese and Opposition Leader Peter Dutton both spoke about Australia's enduring relationship with the Commonwealth.
"For Australia, the Commonwealth is family. And, as with any family, we appreciate our differences," the prime minister said.
Mr Dutton said Australia should not take its British inheritance for granted.
"Our institutions are protected and underpinned by the independence and stoicism of the reigning monarch," he said.
Earlier on Monday, loud cheers and renditions of God Save the King greeted the royal couple as they visited the Australian War Memorial.
The pair privately paid their respects at the Australian War Memorial commemorative area, laying a wreath and floral tribute before moving to the Aboriginal and Torres Strait Islander memorial, For Our Country.
King Charles, sporting a navy suit and a bevvy of military medals, and Queen Camilla, in her white silk crepe court dress, spent more than 30 minutes shaking hands and chatting with hundreds of gathered onlookers - some wearing commemorative crowns, others offering bouquets.
Among those on hand to welcome the royals was Fremantle-based Cliff Chapman.
Sporting a kilt and a seal-skin sporran, Mr Chapman said he was on holiday and decided to stand in the Canberra sunshine to catch a glimpse of the King and Queen.
Asked why he was the only person in the crowd wearing a kilt, he said: "I thought it would stand out a bit."
Dressed in a suit and crown, Hephner the alpaca also got his opportunity to welcome the King and appeared to sneeze on the 75-year-old as he came in for a pat.
Well away from the official proceedings and under the watchful eye of police, a group of a dozen or so Indigenous protesters started up chants of "always was, always will be Aboriginal land".
After the parliamentary reception, their Majesties went their separate ways, with the Queen attending a discussion on family and domestic violence and the King meeting Mr Albanese and Mr Dutton at Government House.
The rest of their itinerary on their one-day visit to the nation's capital includes visits to CSIRO's National Bushfire Research Laboratory and the Australian National Botanic Gardens.
The royals arrived in Sydney on Friday night and spent the following day resting before a series of official events began, their itinerary shaved down due to the King's health.
The royals will return to Sydney on Tuesday where they will meet more members of the public and attend a naval fleet review on the Admiral Hudson vessel.
Following the five-day tour of Australia, they will travel to Samoa where the King will open the annual Commonwealth Heads of Government Meeting.
- with pool reporters
