The traders, coming from different Lithuanian towns, pitched two tents and hoisted the national flag in a field behind the Parliament.
Participants in the action said another dozen associates from Vilnius and other Lithuanian districts and towns were to join them later.
The hunger-strikers are determined to stay near the Parliament all night long and pursue the strike until the government yields to their demands.
Last year, the government introduced a new policy that requires market vendors to document what they trade in order to cut trade in smuggled goods. Small-businessmen claim they have already acquired a government required license and the new regulation would only create more bureaucracy and hinder their business.
This protest action is the continuation of the one staged in early December last year, when a group of small-businessmen endured their strike for a week in bitter frost.
The Vilnius City Municipality has not issued permission for a hunger-strike near the parliament, but the participants maintain they do not need any authorization.
They said that they had already talked to the police and "struck a bargain" to be allowed to stay overnight.
The Lithuanian government said that the hunger strike had political motives behind it.
The government stressed that the leader of the hunger strike action, Eduardas Sablinskas, was running as the Naujoji Sajunga political union candidate in the Parliament by-elections in the Naujoji Vilnia constituency.
"Therefore, it is evident that this action is based on personal political interests and is not aimed at helping the cause of the vendors," the government's statement reads.
The Naujoji Sajunga political union has categorically rejected accusations made by the Lithuanian government that the party's parliamentary candidate is to initiate a hunger strike for personal political reasons.
"The government's accusations can be described as a crude attempt to conceal the real cause of the conflict between the government and vendors," the party's statement reads.
The union maintains that the Association of Small Businessmen and Vendors decided to start a hunger strike in protest to the government's blatant disregard of the vendors demands.
Naujoji Sajunga said it supported the demands made by the vendors and believes that the current government's policy is destroying small business.
"However, it does not mean that the party inspires the decisions taken by the vendors or is in control of them," the party's statement reads.
After the protest action last December, the government has taken most of the demands made by market- place traders into consideration, but the vendors maintain that even the simplified procedure of trade is ruining them.