Following Friday prayers, Israeli police raided the Al-Aqsa Mosque complex, just hours after the Jewish state and Hamas agreed to a cease-fire.
Hundreds of Palestinians had gathered at the mosque for prayers and a celebratory rally when police opened fire with stun grenades and tear gas.
According to the Palestinian news site AlQastal, Israeli police used rubber bullets to disperse the worshippers.
This comes two weeks after Israeli raids on Al-Aqsa, Islam's third holiest site, triggered a deadly Israeli bombing campaign and militant rocket fire in Gaza during the holy month of Ramadan.
"Riots broke out" at the Al-Aqsa esplanade, according to Israeli police spokesman Micky Rosenfeld on Friday.
In a statement, Rosenfeld said that "hundreds of people hurled rocks and petrol bombs at police officers who responded to the scene and started dispersing the rioters."
Violence was still going on, according to AFP reporters at the compound in Jerusalem's Old City.
On Friday, a truce to end the Gaza conflict seemed to be holding, but it is unclear what effect Israel's actions at Al-Aqsa would have.
The Egyptian-brokered cease-fire took effect at 2 a.m. (2300 GMT) on Friday, after an 11-day Israeli bombing campaign in Gaza killed at least 243 Palestinians, including 66 children. Twelve Israelis were killed when rockets were fired into the country.