One woman was arrested during a scuffle with police after Sheehan and the anti-war demonstrators rushed toward the closed doors and kept chanting loudly after the guests went into the dinner.
Rove was speaking to the Associated Republicans of Texas, and ticket prices started at $200. He was not in the Renaissance Hotel lobby during the reception.
"I want him arrested. He planned the war that killed my son," Sheehan told officers guarding the door. Sheehan's oldest son Casey was killed in Iraq in 2004.
Police then ordered the group to leave, but some protesters had paid for rooms for the night. Those protesters went upstairs, including Sheehan.
One protester slipped inside the ballroom during the dinner but was escorted out after shouting about men and women dying, the Austin American-Statesman reported in its Sunday editions.
"Pat, did you get her check before she left?" Rove quipped to the GOP group's executive director, Pat Robbins, as the crowd of 300 laughed, the newspaper reported.
"I don't question the patriotism of our critics. Many are hardworking public servants who are doing the best they can. Some of them are people looking for a free meal," Rove said, drawing more laughs.
Earlier, wearing shorts and T-shirts while guests of the lobby reception walked past in sequined dresses and expensive suits, anti-war demonstrators carried American flags and signs, including one that read "Check your conscience." A few protesters unfurled a large banner from a sixth-floor hotel balcony that read "Rove v. Truth: No Contest. Pink slip Rove."
Those at the reception sipped their drinks and largely ignored the protesters before they started chanting. One man looked at the group and said, "Go Bush!"
Earlier Saturday, the group of more than 70 gathered at the hotel entrance, carrying a large banner that read, "Rove: Guilty of crimes against humanity."
Ann Wright, a former U.S. diplomat who resigned in 2003 in protest over the war, yelled through a bullhorn, "Karl Rove, you are a criminal!"
After about 30 minutes, Austin police made them move onto grass at the edge of the property about a block away. Dozens remained later Saturday, holding signs as cars drove by, honking their horns.
Sheehan and the group left their campsite in Crawford near Mr. Bush's ranch, where they have held vigil the past two weeks, and drove about 100 miles south to Austin.
The war protest will continue until early September, although Mr. Bush's ranch 10-day ranch vacation ended last weekend. Sheehan's 26-day protest last August drew more than 10,000 people to her campsite in ditches off the rural road leading to the ranch, but she recently bought land near downtown for the group to camp on.