The First Minister addressed the crowd outside the Scottish Parliament, following a march down the city’s Royal Mile from Edinburgh Castle.
Mr Yousaf told journalists after the rally that approximately 25,000 people attended the Believe In Scotland event.
Delivering a speech outside Holyrood, he told the crowd that Scotland was facing a “cost-of-union crisis” as he made the case for Scotland’s place in Europe, secured through independence.
He said: “Let me tell you, ladies and gentlemen, the people of this country – they’re not suffering from a cost-of-living crisis, they’re suffering from a cost-of-union crisis.”
Mr Yousaf also took aim at the UK Government’s immigration policies as he said Scotland would be a welcoming place for all nationalities.
Asked if he can deliver on the goal, he said: “That’s certainly the aim, certainly the hope.
“There’s not a short cut to independence, we understand and know that. The UK Government and UK parties continue to deny the democratic mandate that we have.
“We’ve got to create the conditions to make it impossible for them to ignore. The only way we do that is by mobilising the power of the people.”
He also reiterated that the “plan A” towards independence is to test the support for independence at the Westminster election, however the SNP is set to decide on a concrete method at its conference next month.
Government ministers Lorna Slater and Jamie Hepburn also delivered speeches.
The Scottish Greens co-leader Ms Slater took aim at the conflict the Scottish Government has had with Westminster in recent months, including the section 35 order of the Scotland Act which blocked controversial gender reforms.
She said: “Every day when I’m at work I am asking: ‘What we can do to make things fairer, how we can make sure more people get a living wage, how we can do more for the climate?’ And I’m told: ‘We can’t do that, those powers are not devolved.’
“And that’s before Westminster began rolling back the powers that our Parliament has and disrespecting this Scottish Parliament.
“They’re pushing back on the work we are doing for equalities and for our environment, things we believe in deeply and that we know matter to the people of Scotland.”
However, Donald Cameron, constitution spokesman for the Scottish Tories, said: “Humza Yousaf needs to realise he is the First Minister for Scotland, not the SNP, and his appearance at the independence rally shows his top priority is to push for another divisive referendum.
“People across Scotland will be infuriated that the First Minister attended this march and believes separating our country is more important than helping households through the global cost-of-living crisis and fixing our broken NHS and crumbling schools.
“Humza Yousaf continues to be completely out-of-touch with public opinion and people are rightly seeing through his reckless behaviour.”