Once the delayed conference began, delegates elected Alexander Gauland as co-leader along with Jörg Meuthen.
Both hardliners, their election suggests the party is continuing its march further to the right.
Georg Pazderski, the party's regional head in Berlin and a relative moderate, failed to get delegates' backing for the leadership.
AfD won 12.6% of the vote in Germany's federal elections in September, becoming the third biggest force in the Bundestag after the centre-right and social democrat SPD.
They had never entered the federal parliament before but are now eyeing a real chance of becoming Germany's main opposition party.
If Angela Merkel's Christian Democrat alliance agrees a coalition deal with Martin Schulz's social democrats, AfD with 94 MPs would become the biggest non-government party.
With temperatures near freezing, Hanover police used water cannon, batons and pepper spray to clear a path for the 600 delegates.
One demonstrator's leg was broken after he chained himself to a barricade, while an officer was hit on the hand by a flying bottle.
Ten protesters were taken into custody.
A total of five demonstrations were scheduled in the northern city on Saturday. Some 6,000 people joined a pro-immigration rally in the city centre and another rally called by trade unions was expected to draw thousands later.
When the conference got under way an hour late, Mr Meuthen hailed delegates for helping the party achieve national success within five years of being founded.
He said the party was attracting support from voters put off by the other parties' "pathetic childish games" amid an ongoing struggle to form a coalition government.
The party has veered to the right since its inception as an anti-euro force, promoting anti-immigration and anti-Islam policies in its election campaign.
But this sharp turn has created tension within its own ranks, with former co-leader Frauke Petry quitting within days of the election.
The delegates on Saturday confirmed the AfD's rightward trajectory, backing Mr Gauland, the leader of the parliamentary party, for the co-leadership.
Mr Gauland, who has pledged to stop "the invasion of foreigners" into Germany, said he had "allowed my friends to convince me to step in".
Delegates defeated a motion to install Mr Meuthen as the AfD's only president,
They are also due to elect a new executive board to decide the ideological direction of the party and debate policy motions.
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