Oscar Lopez Rivera, who was just released from federal prison after being granted clemency from President Obama, served as the grand marshal.
"It's a great honor, especially because I'm with my people," Lopez said.
He was a leader in the FALN, a paramilitary group which advocated for Puerto Rican independence, and authorities said he is responsible for more than 100 bomb attacks - some deadly - in the 1970s.
"Oscar Lopez does not represent the Puerto Rican community in Chicago, Puerto Rico, in New York, throughout the United States," said Hector Concepcion.
"When somebody has a pattern of blood on their hands, they are, in our opinion, a terrorist," said Larry Ligas, of the Logan Square Concerned Citizens.
Organizers dedicated this year's parade Lopez, who was released in May after serving 35 years.
However, most of the parade attendees were simply there to celebrate Puerto Rico.
The parade was held along Division Street and featured colorful floats, along with performers and cheering crowds.