Palestinians want East Jerusalem as the capital of the state they intend to establish in the West Bank and Gaza Strip.
An Israeli security guard killed a Palestinian in a flashpoint East Jerusalem district on Wednesday, triggering street clashes and Palestinian charges that Israel was undermining US-sponsored peace negotiations.
Israeli police said the guard told investigators he had opened fire on dozens of Palestinians who blocked and stoned his car before dawn in Silwan, an Arab neighbourhood and site of a small Jewish settler enclave.
Two other Palestinians were hurt in the shooting, residents said, adding that the guard provided security to the settlers.
Silwan residents took to the streets after the incident, overturning two cars and throwing rocks at police and passersby. Police said they responded with teargas, water cannon and stun grenades.
Three Israeli civilians and a policeman were hurt in the clashes, police said.
Hundreds of mourners later attended the funeral of the dead man, who was 32 and had 5 children, and sporadic confrontations spread to the nearby Old City, where Islam's third-holiest shrine, al-Aqsa mosque, abuts the Western Wall, Judaism's most important prayer plaza.
"This violent escalation by the Israeli occupying forces represent destructive measures that defeat the peace building agenda," said Palestinian government spokesperson Ghassan Khatib, accusing police of preventing ambulances from reaching Silwan to tend to locals injured in the confrontations.
"These illegal actions of continuing to place heavily armed settlers in the heart of Palestinian neighbourhoods, result in daily provocations and violence against defenseless and unarmed Palestinians and paves the way for such crimes to continue."
Israel captured East Jerusalem along with the West Bank from Jordan in the 1967 war and regards all of the city as its capital -- a status not recognised internationally. Many settlers claim a Jewish biblical birthright to the region.
Palestinians want East Jerusalem as the capital of the state they intend to establish in the West Bank and Gaza Strip, a demand at the heart of peace talks with Israel which resumed this month.
Police said the guard who had carried out the Silwan shooting was in custody for questioning. Israeli government spokespeople were not available for comment.
Palestinians torched cars and threw stones and firebombs at Israeli police in Silwan last month after residents reported that settlers had tried to cross a mosque courtyard to reach an ancient spring where religious Jews conduct ritual ablutions.
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