Dangarembga, 63, an author and filmmaker, took the stand after a magistrate dismissed her request to be allowed more time to prepare her defence.
"We did not stop anybody or force anybody to engage in anything that we were doing," Dangarembga told the court.
She staged the protest alongside a neighbor in the empty streets of the affluent Harare suburb of Borrowdale during the coronavirus lockdown.
"We just walked on our own," she said.
Dangarembga was stopped while holding a sign reading "We want better, reform our institutions", while her neighbor held a placard calling for the release of detained journalist Hopewell Chin'ono, who faced similar charges of inciting violence. It also read "We want a better Zimbabwe for all".
Arbitrary arrests and a crackdown on dissent have worsened in Zimbabwe since President Emmerson Mnangagwa replaced long-time ruler Robert Mugabe in 2017, according to human rights groups.
Dangarembga told the court she did not address any members of the public or the press during the demonstration and was "minding my own business."
"I wanted the peaceful words on the placards to speak for themselves," she said.
She denied resisting arrest, adding she only asked police to explain what she was being arrested for.
"There is a difference between expression and incitement," she told the court, describing her actions as peaceful.
Dangarembga is the author of three international award-winning novels, whose accolades include this year's Windham-Campbell Prizes.
Her 1988 groundbreaking debut novel "Nervous Conditions" was the first book published in English by a black Zimbabwean woman.
Her trial is set to continue next week.